Forlano Innovation Disruptive Innovation 10-17-09

PLEASE SIT IN THE FRONT HALF OF THE AUDITORIUM 1

INNOVATION APPLIED CREATIVITY Disruptive Innovation Laura Forlano, Ph.D. [email protected] http://lauraforlano.org October 19, 2009 Design and Management Parsons The New School NY, New York

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Scenario Planning Exercise • What was difficult about last week’s scenario building exercise? • How did the scenarios that you envisioned come to life through the process of “naming”? • What were some of the best names and scenario descriptions?

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Drivers in Healthcare • business model: public vs. private management • customization: customized individual care vs. mass care • bias: holistic approaches vs. pharmaceutical approaches • distribution: centralized vs. diffused • specialization: general vs. specialized 5

Assignment • 3 memos about 3 different service design ideas that support/enable one of the scenarios that you mapped out • Answer the questions on the assignment sheet • These should be collaboratively brainstormed, written and handed in as a group • If you were absent last week, please see your faculty after today’s lecture

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Disruptive Innovation • A process by which a product or service moves up market and displaces established competitors (Christensen) • A small player in the market starts with simple products, services or applications and moves to more complex products, services or applications • 2-minute video on disruption 7

Disruptive Innovation • Allows a whole new population of consumers to access a product or service that was previously only available to consumers with a lot of money or skill • Disruptive businesses may not seem successful because they may have lower gross margins, small target markets and simpler products and services when they are starting out 8

Sustaining Innovation • Companies innovate faster than their customers’ lives change • Products and services are too good, too expensive or too inconvenient • Companies are more likely to pursue innovations that are small improvements on their earlier successes • Incumbents vs. entrants 9

Success vs. Failure • Listening to customers • Investing in technology, products and manufacturing capabilities that satisfied their consumers • Christensen calls this “the innovator’s dilemma” • When is it a bad idea to listen to customers?

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Disk Drive Industry • • • • •

Capacity increased by 35% per year 50KB in 1967 1.7MB in 1973 12MB in 1981 1100MB in 1995

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Source: http://www.claytonchristensen.com/disruptive_innovation.html

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Examples • • • •

Telephone disrupted the telegraph Cell phones disrupted fixed line telephony Semiconductors disrupted vacuum tubes Community colleges disrupted four-year colleges • Discount retailers disrupted full-service retailers • Retail medical clinics disrupted traditional doctor’s offices • Steam ships disrupted sailing ships 14

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Product Innovation • Mobile phone growth has outpaced fixed telephony • iPhone changed consumer’s expectations about the usability of mobile phones • Created by a computer company rather than an established telecom carrier (though Apple collaborated with Cingular, now AT&T) • However, each new model of the iPhone represents only a sustaining innovation rather than a disruptive innovation 16

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Service Innovation • ZipCar disrupted the traditional car rental model by allowing consumers to rent hourly rather than monthly • Car sharing is also disruptive to car ownership

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Business Process Innovation • Spain-based Zara created a two-week production cycle that disrupted the more established players in the US fashion market • Previously, productions cycles were seasonal i.e. Fall, Winter, Resort, Spring, Summer • Due to Zara’s close relationships with local producers in Spain, they were able to deliver styles two-weeks after they hit the runway

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In-Class Exercise • What companies and/or industries are being disrupted by the following products, services or business models? – – – –

Linux (free libre open source software) Fashion-rental services? Couchsurfing/coworking/cohousing? Mp3s and iTunes?

• Why or why not?

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Discussion • What companies and/or industries are being disrupted? Why or why not? – – – –

Linux (free libre open source software) Fashion-rental services? Couchsurfing/coworking/cohousing? Mp3s and iTunes?

• Compact fluorescent light bulb example – Why has it taken so long for them to penetrate the market? – What are their advantages/disadvantages? – Who are the biggest players in advocating for their 29 use?