Exam 2

Question 1

What are the two characteristics of disruptive innovations (sometimes referred to as disruptive technologies)?

Answer 1

First, they come to market with a set of performance attributes that existing customers don’t value. Second, over time the performance attributes improve to the point where they invade established markets.

Question 2

The acronym VoIP is considered by many to be a disruptive innovation. It refers to:

Answer 2

the technology used in internet telephony.

Question 3

Disruptive innovations are often so damaging because the new technology has better margins than the incumbent technology being displaced.

Answer 3

False; The most disruptive technologies also often have worse margins than the initially dominant incumbent offerings. Since these markets don’t look attractive, big firms don’t dedicate resources to developing the potential technology or nurturing the needs of a new customer base.

Question 4

Firms that listen to their customers are more likely to be able to counteract the onslaught of potentially disruptive technologies.

Answer 4

False; The majority of a firm’s current customers don’t want the initially poor-performing new technology.

Question 5

ARM chips are generally not as powerful as desktop chips, however, Moore’s law is making these chips powerful enough for server tasks, bringing with them the added benefit of requiring less energy to operate.

Answer 5

True; ARM chips (once computational weaklings) are now fast enough to invade the established market for laptop and server chips. ARM designs are especially attractive to smartphone manufacturers because they are far more power-efficient than the chips Intel sells for PCs, laptops, and servers. The Intel chips were never designed for power efficiency; they evolved from markets where computers were always plugged in.

Question 6

This firm’s processor designs power the majority of smart phones on the planet.

Answer 6

ARM; Chips based on Intel rival ARM power nearly all of the smartphones on the planet. Samsung, Apple, Motorola, and Xiaomi all use chips with ARM smarts.

Question 7

ARM has been so successful because its chip designs can run any software originally designed to run on Intel chips.

Answer 7

False; Unlike Intel-compatible rival AMD, ARM chips can’t run software that conforms to the Intel x86 standard used in most PCs and servers, so all of a firm’s old code would need to be rewritten and compiled to work on any ARM-powered servers, laptops, or desktop (a potentially big switching cost).

Question 8

Example of once-large firms that failed to make the transition as new technologies emerge to redefine markets.

Answer 8

Kodak
- market share near 90 percent
- anything more lucrative was illegal
- crushed by shift from chemistry to bits
- today, bankrupt and 1/14 of its workforce

Question 9

The tech industry is the most fertile ground for disruptive innovation.

Answer 9

True; price elasticity created by markets for fast/cheap technology speeds ups the fall of giants. Whole new markets open up.

Question 10

What is disruptive innovation?

Answer 10

Giant-killing market shocks that catalyze growth; show why so many once-large firms have failed and sheds light on practices that may help firms recognize and respond to threats.

Question 11

General examples of disruptive technologies.

Answer 11

• digital cameras (Kodak)
• digital music; As storage became smaller and cheaper, Apple came with iTunes and a near monopoly, then came Spotify with streaming music
• digital video; Netflix leveraged dominance to create a business within its business
• mobile phones
• tablet computing
• Internet telephony
• ride-sharing services; not yet reliable as opposed to cab. then came Uber, there were more Uber drivers than taxis, ride prices fell, reliability and security rose

Question 12

Why don’t disruptive technologies need to perform better than incumbents?

Answer 12

They simply need to perform well enough to appeal to customers of the incumbents (lower price). They come to the market with features not demanded by existing customers, but they improve over time until the innovation can invade est. markets.

Question 13

Why do big firms fail?

Answer 13

Fail to see disruptive innovations as a threat because they listen to their customers and the markets aren’t attractive at first.

Question 14

How are big firms left behind?

Answer 14

By the time the new market demonstrates itself, startups have been at it and have the expertise, benefitting from increasing sale and growing customer base. Big firms forced to play catch-up.

Question 15

Microsoft’s CEO did not think iPhone was going to get any significant market share.

Answer 15

True; but Apple did and became the most profitable and valuable public company in the US. Microsoft focused on software and Windows desktop, server operating systems, Xbox.

Question 16

How was Intel disrupted?

Answer 16

Due to fast and cheap tech and a shift in demand for something it had not invested in, the firm’s chips that cost a lot and have great margin was disrupted by ARM power. ARM doesn’t manufacture chips itself but licenses designs to rivals who tweak them. Attractive to smartphones because more power-efficient than Intel’s chips for PCs, laptops, and servers.

Question 17

How did ARM chips grow?

Answer 17

Apple used ARM tech in its smartphones, laptop and desktop chips, beginning with the M1.

Question 18

________ left WebEx Cisco division to eventually create ______—the multibillion-dollar firm that would win video calling in the midst of the pandemic.

Answer 18

Eric Yuan; Zoom

Question 19

While no crystal ball exists to identify disruptive technologies with perfect accuracy, firms that have external conversations with innovative external groups, as well as improving internal communication with technologies can help.

Answer 19

True; Having conversations with those outside the firm working on the experimental edge of advancements is key. Top-tier scientific researchers and venture capitalists can be particularly good sources for information on new trends. Increasing conversations across product groups and between managers and technologists can also be helpful. Many disruptive firms were started by former employees of the disrupted giants. Employees who feel so passionate about a trajectory for future technology that they are willing to leave the firm and risk it all on a new endeavor may be a signal that a development is worth paying attention to.

Question 20

Facebook requires employees to leave their teams for new assignments at least once every eighteen months.

Answer 20

True; It’s common for many firms to regularly rotate staff (both management and engineering) to improve idea sharing and innovation.

Question 21

If you want to have conversations with colleagues, clients, and potential employers, you’ll need to speak their language and understand their vocabulary. One term you may hear is ____________________. The phrase is often used to refer to disruptive technology theory and it is also the name of Prof. Clayton Christensen’s book (Christensen is considered the father of Disruptive Innovation theory).

Answer 21

Innovator’s Dilemma

Question 22

As disruptive technologies emerge, by definition they will eventually take market share away from a firm’s higher-margin incumbent offerings. The result of the transition could

Answer 22

Lower profits, incur losses, contract corporate revenues;Trying to nurture new technology in-house is also a challenge. Top tech talent will often never be assigned to experimental products, or they may be pulled off emerging efforts to work on the firm’s most lucrative offerings if the next version of a major product is delayed or in need of staff. And as disruptive technologies emerge, by definition they will eventually take market share away from a firm’s higher-margin incumbent offerings.

Question 23

The packaged software company, Intuit appears to be successfully navigating the rough waters of disruptive innovation. They have done through acquisition of competition and developing cloud-based products.

Answer 23

True; One firm that appears to be successfully navigating the rough waters of disruptive innovation is Intuit. The highly profitable, multibillion-dollar firm is the leader in several packaged software categories, including personal finance (Quicken), small business (QuickBooks), and tax prep (TurboTax) software. Acquisition of rivals is one way Intuit has dealt with disruption. But the future is in the cloud. The firm’s TurboTax now has cloud-based offerings and a free SnapTax app—take a photo of your W2 and the app fills out your taxes for you automatically.

Question 24

Intuit has shifted from the disruption caused by the emergence of cloud computing by shifting to markets for packaged software.

Answer 24

False; Intuit has been a leader in several packaged software categories, including personal finance (Quicken), small business (QuickBooks), and tax prep (TurboTax) software, but has effectively shifted to cloud-based offerings, some of which are initially free. So-called connected services that either run in the cloud or enhance existing offerings make up over 65 percent of the firm’s revenues.

Question 25

Experts advise firms to hedge against disruptive technology by developing a portfolio of technology options, giving the firm the right (but not the obligation) to continue and increase funding as a technology shows promise.

Answer 25

True; Firms identifying potentially disruptive technologies are wise to create a portfolio of technology options‚Äîstartups or in-house efforts otherwise isolated from the firm’s core business and management distraction. Options give the firm the right (but not the obligation) to continue and increase funding as a technology shows promise. It’s also important that these experimental efforts are nurtured in a way that is sufficiently separate from the parent to offer staff working on the innovation a high degree of autonomy and protection.

Question 26

What is the “creosote bush effect”?

Answer 26

Managers can act like the rival-killing creosote bush, pulling high-quality engineers off emerging projects if a firm’s top offerings need staff or other resources to grow; The desert-dwelling creosote bush excretes and drops a toxin that kills nearby rival plants that might otherwise siphon away resources like water or soil nutrients. Threatened managers can act just like the bush-they’ll pull high-quality engineers off emerging projects if a firm’s top offerings need staff to grow. Lucrative old tech has a credible case for big budget allocations and is first in line when planning corporate priorities.

Question 27

_______ are measurable values defined by a firm to demonstrate progress toward a given goal.

Answer 27

KPIs; KPIs are measurable values defined by a firm to demonstrate progress toward a given goal. Examples are quite broad and could include customer acquisition, cost reduction, or improvement in the ROI of online ad campaigns.

Question 28

Many disrupted firms were started by former employees of the disrupted giants.

Answer 28

True; Xerox to Adobe, Hewlett Packard to Apple, Oracle to Salesforce, WebEx Cisco to Zoom

Question 29

Tactics to navigate potentially disruptive tech:

Answer 29

build a portfolio of options, investing in firms, startups, or internal efforts that focus on that possibly next big thing

Question 30

Techniques for navigating the challenges are hard to get right.

Answer 30

Facebook felt forced to make multibillion-dollar purchases for Instagram and Whatsapp. Google missed the key trends of mobile. AT&T cut future investment based on inaccurate prediction of success. Microsoft bought Nokia after lagging behind Apple and Google but it became a loss.

Question 31

Yahoo vs Intuit

Answer 31

Yahoo! represents a firm that attempted to invest in potentially disruptive innovation, but lost its lead due to poorly supported efforts and underinvestment. Intuit, by contrast, saw disruption on the horizon and invested heavily in both internal efforts as well as acquisition, weathering the shift to free products, cloud-based products, and now leveraging AI and machine learning.

Question 32

Potential Disruptive Technologies

Answer 32

3D Printing, AR, Cryptocurrencies and blockchain, Gene editing, driverless cars, wireless tech, battery tech, robotics and AI, quantum computing

Question 33

Amazon took over seven years to turn a profit.

Answer 33

Amazon took over seven years to turn a profit, had previously recorded over $1 billion in losses in a single year, $3 billion in total losses, and many doubted the firm would ever make any money. The company’s stock, which had previously traded above $100, was below $3.

Question 34

Bezos is regarded as such a successful CEO in part based on his relentless focus on his firm’s quarterly performance.

Answer 34

False; Bezos steadfastly refused to concentrate on the quarterly results Wall Street frets over. Instead, the Amazon founder has followed his best reckoning on where markets and technology were headed, postponing profit harvesting while expanding into new markets.

Question 35

Amazon’s attempt at creating a smartphone competitor to iOS and Android, the Fire Phone, was a great success.

Answer 35

False; The firm’s attempt at creating a smartphone competitor to iOS and Android, the Fire Phone, was a multimillion-dollar disaster—but the firm’s recent batting average in new product introductions has been impressive.

Question 36

Amazon takes a relatively long-term view with respect to investing in initiatives and its commitment to grow profitable businesses.

Answer 36

Amazon takes a relatively long view with respect to investing in initiatives and its commitment to grow profitable businesses. The roughly seven-year timeline is a difficult one for public companies to maintain amid the pressure for consistent quarterly profits.

Question 37

During the first ten months of 2020, Amazon had to let go of over 427,000 employees.

Answer 37

False; In the first full quarter of the pandemic, Amazon sales soared nearly 60 percent over the same period a year earlier. Keeping up with that demand was a challenge—Amazon added over 427,000 employees during the first ten months of 2020.

Question 38

Who will take over as Amazon’s new CEO?

Answer 38

Andy Jassy; Amazon founder and CEO Jeff Bezos was at the top of his game, but shocked the world in early 2021 when he announced he’d step down later that year, passing the day-to-day management reins to a new CEO, Andy Jassy, a 24-year veteran of the firm who at the time was running AWS.