The_Innovators_Dilemma__Clayton

with its own value chain, 10 is associated with each box in a network diagram, and the firms supplying
the products and services used in each network often differ (as illustrated in Figure 2.2 by the firms
listed to the left of the center column of component boxes).
As firms gain experience within a given network, they are likely to develop capabilities, organizational
structures, and cultures tailored to their value network’s distinctive requirements. Manufacturing
volumes, the slope of ramps to volume production, product development cycle times, and
organizational consensus identifying the customer and the customer’s needs may differ substantially
from one value network to the next.
Given the data on the prices, attributes, and performance characteristics of thousands of disk drive
models sold between 1976 and 1989, we can use a technique called hedonic regression analysis to
identify how markets valued individual attributes and how those attribute values changed over time.
Essentially, hedonic regression analysis expresses the total price of a product as the sum of individual
so-called shadow prices (some positive, others negative) that the market places on each of the product’s
characteristics. Figure 2.3 shows some results of this analysis to illustrate how different value networks
can place very different values on a given performance attribute. Customers in the mainframe computer
value network in 1988 were willing on average to pay $1.65 for an incremental megabyte of capacity;
but moving across the minicomputer, desktop, and portable computing value networks, the shadow
price of an incremental megabyte of capacity declines to $1.50, $1.45, and $1.17, respectively.
Conversely, portable and desktop computing customers were willing to pay a high price in 1988 for a
cubic inch of size reduction, while customers in the other networks placed no value on that attribute at
all. 11
Figure 2.3 Difference in the Valuation of Attributes Across Different Value Networks
Cost Structures and Value Networks
The definition of a value network goes beyond the attributes of the physical product. For example,
competing within the mainframe computer network shown in Figure 2.2 entails a particular cost
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