Business summary by Ben Cheung condensed from "Innovation" by Richard Foster --CHAPTER 1 WHY LEADERS BECOME LOSERS +"To cherish traditions, old buildings, ancient cultures and graceful lifestyles is a worthy thing - but in the world of technology to cling to outmoded methods of manufacture, old product lines, old markets, or old attitudes among management and workers is a prescription for suicide." Sir Ieuan Maddock --CORPORATE SAILING SHIPS +The age of the commercial sail ended with the 7masted Thomas W. Lawson , and steamships began to rule the seas. +National Cash Register w/ electromechanical parts, vs electronic machines - failed +P&G w/ Tide first synthetic laundry detergent decimated Lever Bro +Leading companies have inherent disadvantages... Result from technological change. --UNDERSTANDING THE DYNAMICS OF COMPETITION +Focus their efforts on making their operation ever more cost effective. +Innovation is risky but more risky than defending their present business +Assume that the day after tomorrow will not be like today. When change comes it will be swift. +Patterns of change are predictable and subject to analysis +Focus on being in the right technologies @ the right time, being able to protect their positions. +Believe that innovation is inevitable and manageable. +Assume that the innovators will ultimately have the advantage. +Know they will face problems and go through hard times, they are prepared to weather them. they assume that as risk as innovation is not innovating is even riskier. --THE S-CURVE +Initially, as funds are put into developing a new product or process, progress is very slow. Then all heck breaks loose as the key knowledge necessary to make advances is put in place. Finally, as more dollars are put into the development of a product or process, it becomes more and more difficult and expensive to make technical progress. --LIMITS : A NEW WAY TO THINK ABOUT TECHNOLOGY +In everything we do or make we are governed by limits. When we approach them we must change or not progress anymore. +Limits determine which technology/processes are about to become obsolete. Reason why products eventually stop making money for companies. +Because limits are the best clue to recognize when they will need to develop a new technology. +Technology even variously defined always has a limit - either the limit of a particular technology, or a succession of limits together make up the larget technology. +But usually there are a few that are crucial to a product or its production. +If you are at the limit, no matter how hard you try you cannot make progress. As you approach limits, the cost of making progress accelerates dramatically. +The limits of connecting wires, that convinced Noyce/Kilby to develop a new process and product that eventually became the semiconductor chips. At the time it was hard for outsiders to see why these companies and men abandoned their past successes. But the outsiders didn't understand limits. --THE ATTACKER'S ADVANTAGE +Periods of change from one group of products or processes to another, technological discontinuities. Break between the S-curves and a new one begins to form. Not from the same knowledge that underlays the old one but from an entirely new and different knowledge base. +Technological discontinuities 7/10 unseat industry leaders. +As limits are reached, it becomes increasingly expensive to make progress. +New possibilities that frequently depend on skills not well developed in leader companies. As these attacks are launched, they are often unnoticed by the leader, hidden from view by conventional analysis. +The youthful attack battles by virtue of success and training in market niches. The defender, lulled by the security of strong economic performance for a long time and by conventional management wisdom that encourages him to stay his course, his faith in evolutionary change, finds it's too late to respond. Final battle is swift and the leader loses. Doomed by doing too little, too late. --A NEW PARADIGM +Emerging technological opportunity, juxtaposed with a maturing but still improvable traditional technology , provided an opportunity to grab leadership. +S-Curve a solid base, and doing what is necessary to capitalize on opportunities. There are no static advantages in business. +When it comes to technology the best strategy may be to do the unfamiliar. Move away from familiar areas into less familiar ones. --THE COURAGE TO CHANGE +Limit-breakers have unusual ability to recognize limits and ways around them. Ought to be hired or promoted. +Can spot ways to circumvent limits by switching to new approaches. They are essential too. +Hybrid products that seem to be messy assemblages of old and new technologies can sometimes be essential +Replace his search for efficient with a quest for competitiveness. +With the conviction to insist that the company abandon its technology and skill base when everything in classic economic terms is going well, someone with a thick skin to endure the criticism that will come when the first steps toward new products and processes inevitably go astray or prove disappointing. +Understanding S-curves is key. These curves can be sketched now. Precision isn't as important as point of view. +Enough to know the rough shape of a technology's approach in order to make good judgements. If change occurs at the time learning starts to slow, then there is a change to avoid the dramatic deterioration. This the "observation point" when you can see the past and the future, then there is time to reconsider what one is doing. +Even when managers understand what is necessary to stay ahead, only a handful have the conviction and discipline to act on that understanding. --CHAPTER 2 THE AGE OF DISCONTINUITY --IT'S HAPPENING ALL AROUND US +Discontinuities , frequency is on the rise. Ramifications can be enormous. +Products of molecular engineering, away from the traditional materials of the Industrial Revolution. Performance for the headaches of switching to an unfamiliar process; lighter-weight and more energy efficiency in exchange for huge capital investments. +Essense of entrepreneurial opportunity : to become a beneficiary of change rather that a victim of change. --THE FOURTH WAVE +Historically, technological discontinuities have happened in bunches. +The first few years see a buildup of new technological potential. These are followed by a period during which new and far-reaching innovations burst on the scene, and then things gradually slow down during a long period of commercialization. +Nikolai Kondratiev, first wave lasted from 1790-1840 new technologies in the textile industry, potential of coal and steam power. 2nd wave 1840-1890 development of railways and the mechanization of production. third Kondratiev wave 1890-1940 based on electric power, advances in chemistry and the internal combustion engine. Our current 4th wave 1940-?? based on electronics. +Turn-around time. Time between the perception of the need or demand for a new product and its shipment in large quantities. Computer-integrated manufacturing. --THE DECLINE OF R&D +A time that if a company wanted to win it needed to invest in its own variant of a Los Alamos +SECOND ERA : Levitt "Marketing Myopia" - we-ve forgotten needs of our customers. We need to get back in touch with them. Marketing research gained respect and importance. +As philosophy changed from technology to driven to market driven. +The number of new products accepted by the customers went up dramatically during this period. +Unfortunately profits remained flat because everybody was doing the same thing. In their zeal to find out what customers wanted, companies forgot about meeting these needs in unique and competitively protectable ways. +THIRD ERA : Somehow this was blamed on technology and its pushed even farther into the corporate doghouse. by late 60's companies started to loop for new opportunities through diversification. The conglomerate era had arrived. +The problem wasn't their technology but the way their guided and managed technology. +Rather than downgrading or isolating technology, they had to integrate it into the mainstream of their business so they could use all its potential to beat the competition. +Third era, where technology was seen as a way of gaining and sustaining a competitive advantage. +Technology was managed "strategically." +The strategic approach to managing technology worked for periods of continuous or evolving technical change. --MANAGEMENT OF DISCONTINUITIES. ++FOURTH ERA : The management of discontinuities. Specify and measure technological performance. Seek and understand alternative approaches and their limits. +Splitting its research operations from developing functions. +Set up R&D but not w/ intention of setting up an academic institute - all the work will be product-oriented. How they manage technology to maintain their competitive edge. --CHAPTER 3 : LESSONS FROM THE LIMIT-BREAKERS --UNDERSTANDING LIMITS +They place a high value on understanding the limits of their technologies +Which technical factors of our product were most important, determine both the theoretical and practical limits to these factors. +A systematic identification of the technical performance factors determining the value of our product and a clear view of the mechanisms limiting those factors were very helpful in directing our research efforts. +The S-curve as the limits are approached, expensive to carry out further development. Have to increase its technical expenditures at a more rapid pace. Or it will have to accept a declining progress. +Look at functional skills +As limits of a technology are reached, the key factors for success in the business change. The actions and strategies that have been responsible for the successes of the past will no longer suffice for the future. +Maturing of a technology, opens up the possibility of competitors catching up to the recognized market leader. Competitors better anticipate the future key factos for success. --THE LESSONS OF THE BIG SHIPS +Thus limits , if known and known correctly, confer a degree of predictability on the S-curve that it would otherwise not have. Predictability is what makes the S-curve a useful concept. +If one knows that the technology has little potential left, that it will be expensive to tap, and that another technology has more potential. Only a matter of time before a technological discontinuity erupts. +Steam power, 1940 turbine ship, 1894 HMS Turbina. +It was also known that speed limits of steam ships were far higher than for sailing ships, thus a discontinuity was probably inevitable, it was then that Thomas W. Lawson was conceived, and it was bound to lose. --FINDING THE LIMIT +1) Relating these "technical factors" which are measurable attributes of the product or process, to the factors that customers perceive as important. +2) Problem with performance parameters is that they keep changing. +change also due to Social or economic environment as well +The people who should be sensing these potential changes in customer tastes, the salesmen are not particularly well attuned to seeing them. They would rather sell today's products. The people we rely on to keep us close to the customer and new developments often do not. So our structure and systems work to confirm our disposition to keep doing things the same way. +We are thus likely to see only what we expect and want to see. +We're scanning our environment, but in fact he is scanning his own mind. +Changes in customer preferences get transmitted slowly, after special studies specifically to examine customer preferences. --LESSONS FROM THE LEADERS +Two major projects. One is aimed at determining what limits nature sets to the improvement of current mainstream technology. +Second project is aimed at the single most promising radical alternative. +Try to have knowledge of where technical limits are - knowledge that is quantitatively expressed and based on actual research. --LIMITRY +Way of thinking. Fundamental principles that will ultimately stop progress. I call them limiting mechanisms. Qualitative descriptions. +Success is defined by the act of finding the limits. Failure is the failure to find the limits. +Progress both by trying to think through to the end of the problem, and by working his way forward from where the technology is today. +Goes from the science backward and from the technology forward, using judgement understand the network of limits that precede any technical development +Experienced, good understanding of business problems, understand the constraints placed on any product by the way it is produced. Skilled at seeing the limits of technologies where others do not. +The absence of limit-breakers can be costly. +But the seekers of perpetual motion machines are trying to solve a serious problem, even if their approach ought not to be considered seriously. They are really trying to find ways around limits, and this is a valuable undertaking. People who can figure out how to avoid limits, once we know what they are, are the "limit breakers" and are very valuable people." --LIMIT BREAKERS +Jack Kilby solved a limits problem and in doing so invented one of the most important products of the twentieth century - the integrated circuit. +Components wired together, a mess +Scientific America : "AHA!" experience. It is what you say when you see a problem in a wholly new way. A way that gives you wholly new insights. consists of seeing what everybody has seen and thinking what nobody has thought. That's the "AHA!" experience. +Who succeed in circumventing limits. They become obsessed with the problem. They seek radical alternatives but ones that are essentially simple, elegant (make everything out of one material) and potentially low-cost. They use experience drawn from other areas, rather than continue to try to solve the problem with reapplication of the same principles. Limit breakers often come from fields that are different from those where prior experience has been concentrated. that is the advantage of limit breakers. They are not trapped by the decreasingly effective approaches of the past. +1) Limits of limit analyses. The first is that it does not follow that if you are close to the limit of a technology, there is no more technical room to maneuver. +So there are always new ways to do just about anything. +Doesn't follow that just because you've reached the limit of one technology there isn't another technology that can solve the customer's problem in a superior way. +2) Possible to be wrong about what the limits are. +Men, men of science had used the arguments of limits to convince themselves and others of exactly the wrong conclusions. Misapplied their science. They lacked the vision, or the knowledge to see around the next constraint. They would have probably used the "tyranny of numbers" to reach the wrong conclusion about the potential for miniaturizing the transistor. +There is a limit-break out there with a totally new approach. The most important question a company must ask it whether or not there is a limit breaker on the horizon. --CHAPTER 4 : THE S-CURVE : A NEW FORCASTING TOOL --HEARTS AND MINDS +Happens so often in the early stages of research, one removes one impediment only to find another. And that is why the S-curve is so flat in the beginning. +The inevitable trials and errors of research and invention. +A rather long period of little progress followed by growing success --DIMINISHING RETURNS +Can also work the other way, rather than showing more and more progress with less and less effort, each new step makes less and less progress. +S-curve : learning and diminishing returns. The path of development of products and processes each point representing an improvement in performance. --A FORECASTING TOOL +S-curve can yield valuable insights. +Relationship between effort put in and results achieved. +Not the passage of time that leads to progress, but the application of effort. +People frequently make the error of trying to plot technological progress versus time. +Might appear that a technology still has great potential but in fact what is fueling its advance is rapidly increasing amounts of investment. --STRATEGIC MANAGEMENT OF DISCONTINUITIES +The start of the curve we need to put in significant effort before we can expect to see results. Once the learning is done, we being to make significant progress for very little expenditure of effort. +At some point we being to approach limits of the technology and we start to run out of steam. Then the question is might there be another way to deliver the desired performance. Some new technology which, though still undeveloped, might eventually outperform the current one, which is increasingly resisting improvement? +S-curves almost always come in pairs. Gap between the pair of S-curves represents a discontinuity - a point when one technology replaces another. +Companies that learn to cross technological discontinuities have lived. They invest in research to know where they are on relevant S-curves and know what to expect from the beginning, the middle and the end of these curves. +The Fourth era : The management of discontinuities. +In the third era : Strategic management of technology. Become more sophisticated at massaging the shape of the curve, making it steeper by developing new products and processes faster than their competitors. Krubasik : The need to cut development times depends on both the costs of development and the profits that might be missed if development were delayed. +that the cost of being late to the market overwhelmed the cost increases for accelerating development. +1) Design and engineering were done as far upstream as possible +2) Some have learned how to share the development of technology and products. Use of external suppliers. This is a fertile area for saving time and raising quality control. Better companies collaborate as much as they can. +3) Administrative procedures can also be eliminated to speed up development. +companies have learned that in order to be fast to the market, they must invest in understanding the science that supports the base of the S-curve. Too many companies develop products empirically. They know things work, but not why they work. They rush through the engineering and then hit some major problem that requires an understanding of the supporting science which they don't have. No base for understanding limits, anticipating progress or fixing performance problems, they inevitably occur when a product is developed too quickly. +1) Underestimation of capital costs is norm for advanced technologies +2) Poor cost estimates , and poor performance usually early in the development of the technology. +3) Cost variance due to insufficient technical information before the project began. +All of these things, while they improve the productivity , and get new products to market fast, can be futile. +None of these efforts will save a company from a new technology. On a new S-curve bottom. --EFFICIENCY VERSUS EFFECTIVENESS +Third era : Focuses on efficiency when need to be concerned with effectiveness. Effectiveness is set when a company determines which S-curve it will pursue (vacuum tubes or solid state). Efficiency is the slope of the present curve. Effectiveness deals with sustaining a strategy - efficiency with the present utilization of resources. Moving into a new technology almost always appears to be less efficient than staying with the present technology because of the need to bring the new technology up to speed. +Someday it will be 10-30x more efficient to invest in the new technology, and it will outperform the existing technology by a wide margin. +Fundamental dilemma is that it always appears to be more economic to protect the old business than to feed the new one at least until competitors pursuing the new approach get the upper hand. +In business, wrong to believe that the defender, the competitor with the largest market share, the most knowledge of production processes and distribution, will have the advantage in combat in the marketplace. +The defender is at an inherent disadvantage. He may not even know he is being attacked until the attack is well along. The attacker can hide in a niche. He is often more powerful than he appears, and more motivated. +U.S. companies could double their R&D productivity. More effective choice of projects and improvements in the work performed. +Usually a 5:1 difference in productivity between investments in emerging and mature technologies. +Have seen differences in productivity in electronics technology on the order of 20:1 to 30:1. Because of the basic choice of technology. People wondered how 50's tiny TI could compete w/ giants. Try multiplying TI's size by 30! By being on the right technological S-curve, TI compensated for much of its size and market power disadvantage. +Managers often talk about improving the productivity of a plant or of sales, they expect a 10-15% gain. We are talking 100-500% differences in technical productivity between competitors because one made the right technological choice and the other did not. +Even if a defender succeeds in managing his own S-curve chances are he will not be able to raise his efficiency by more than 50%. The attacker whose productivity might be climbing 10x faster because he has chosen a different S-curve. Defenders and attackers have a different perspective. +Attack, productivity is the improvement in performance of his new product over his old product divided by the effort he puts into developing. The defender, observes the productivity through the eyes of the market, treating the new product a curiosity. So in his eyes the attacker's productivity is quite low. +First version of a wholly new product is frequently just marginally better than the existing product. +The danger comes in using this erroneous perception to figure out what is going to happen next. +Defenders err by thinking that the attacker's second generation new product will require enormous resources and result in little progress. +REallocating resources is thus a painful business. +Venturing into new areas where they lack skills and for forsaking the tried and true. Manage a technological discontinuity. Forsake the past by abandoning a technology that, more often than not, has just entered the most productive phase of S-curve +Knowledge building , analysis, and the calculation of limits. --CHAPTER 5 : HOW LEADERS BECOME LOSERS +"Businessmen go down with their businesses because they like the old way so well they cannot bring themselves to change...Seldom does the cobbler take up with a new fangled way of soling shoes and seldom does the artisan willingly take up with new methods in his trade. - Henry Ford --A LEADING CAUSE OF CORPORATE DEATH +Leadership changes hands in about 7 out of 10 cases when discontinuities strike. A change in technology it certainly is among the leading causes of corporate ill health. --ALLIED VERSUS BASF +Was constrained by its lower technology potential. Only way naphthalene users could stay ahead of ortho. users was to pour more money into developing the manufacturing process. But ultimately, they would lose. +For naphthalene-PA, the slope of its S-curve or productivity during the middle, adolescent stage was 5x greater than productivity in the last or mature state. +Allied had reached the limits of its technology and could not ever hope to catch up with BASF no matter how much it invested in the old naphth. technology. --DU PONT VERSUS CELANESE +Du Pont and American Viscose tried to better the other's product with a series of improvements. Because nylon had higher limits, rayon began losing share. +Du Pont didn't know where nylon was on its S-curve. that proved costly. +Lots of money poured into R&D did not make a difference. Polyester was still in its adolescence. Celanese adolescent poly. had 5:1 advantage over Du Pont's mature nylon. +Difference was essentially one of technical choice, and technology more than any other single variable dictated the relative effectiveness of Du Pont and Celanese. +Part of the problem at least can be traced to how Du Pont organized itself internally. +Celanese was also bin in the fiber business, but it didn't have a position in nylon to protect. +Du Pont didn't lose out because it was unaware of technical possibilities of polyester, but because it implicitly assumed could control the pace of innovation in the marketplace. --WELCOME TO GERMANIUM GULCH +In every atom there is an energy band gap. It is the amount of energy that must be put in to an atom to knock off an electron. +electricity, Which is basically flow of electrons between atoms. Carbon, rather tough to do = insulator. +Copper = conductor; Electricity flows with ease. Two extremes. "semi"conductors little bit of electricity but not a lot. +Germanium has a rather small band gap, the transistor used germanium first. +It also makes it easier to unwanted impurities in the manufacturing process to degrade the performance of the final product. Hard to produce germanium devices reliably. High reject rates. +Enther silicon, with a higher band gap but greater reliability. This reliability is of tremendous commercial consequence. +High reliability translated into low cost, and therefore into a competitive advantage. --SWEET SUCCESS --DEFENDER'S PARADOX +50's which marked the commercial start of the modern electronics era, vacuum tubes were about $700MM market, transistor $7MM. Only RCA and Philips became successful producers of transistors and integrated circuits. They were the only ones that survived this technological discontinuity. +1) Variants of error : First is the decision not to invest in the new technology. +2) The second is deciding to invest but picking the wrong technology. Hughes, solid-state electronics w/ germanium lost. +3) Third is cultural. Companies failed because of their inability to play two games at once : to be both effective defenders of what quickly became old technologies and effective attackers with new technologies. +Like so many other companies, American Viscose faced the defender's paradox. It couldn't overcome the instinctive tendency of protecting its existing business even though investment produced ever diminishing returns. As a result it did too little, too late. Westing house did this, in part, by burying its electronics operation so far down in its organization structure that top management had scant chance to take any notice of it, much less give it support. Du Pont did the same w/ polyester. +That technological change necessitates significant organizational change. Changes in leadership and career paths. Disruption of prior expectations. Again and again companies lose their leadership not only because of weak strategies but also because of strong cultures. --CHAPTER 6 : THE DEFENDER'S DILEMMA "Ignore, ridicule, attack, copy, steal" Arthur Jones, Nautilus +It is relatively easy to spot new technologies on the horizon and to decide to monitor them or invest. Much harder is to stunt the growth of the older technology by withholding development funds from it even though progress can be made. +the company's sticking to its knitting, of doing what it knew best. = Error. +1971 NCR was still clinging to the past, endlessly refining an obsolete electromechanical technology, even though the computer revolution was on the verge of overwhelming it. +RCA was , by far, the most successful of the leading tube makers in crossing the discontinuity to solid state, even RCA was plagued by the difficult choices of which technology to back. "Why should we cannibalize our profitable tube business for uncertain profits from a rapidly changing, solid state business?" +"Looked like RCA was firm in its decision to move ahead into solid-state electronics. Group to develop solid-state devices, reported to the head of the electronics business, also in charge of vacuum tubes. It made no sense to cannibalize a proven source of income. +Smaller competitors like TI had so such cannibalization to worry about and so moved ahead with more direction and purpose. +All these changes, resulting from the frustration of trying to defend an old technology that provided the cash wile attacking with a new technology that consumed cash, took their toll. With each reorganization the strategic direction of the group was changed. Morale waned. The shuffling undermined the engineers' self-esteem. They were always being asked to stop things just short of completion. Always being rushed to start something new without adequate preparation. --CULTURE SHOCK +Changing the underlying technology of a company of division requires changing its culture. +So tricks of the trade that made an engineer unusually productive in the chemical business aren't necessarily going to sustain him in biochemicals. The ability to mix a vat of stuff with a big paddle just isn't going to work in the biochem. industry based on bugs. The engineers must invent new ways of stirring. +The major cultural difficulty in managing through technological discontinuities is making skill transitions. What any company amounts to , no matter how large its assets base , is the skill of its people. +There are strategy changes as well. +Strategy of decentralized plants. +A decentralized business doesn't require the kind of functional organization that chemical companies currently have. Systems can also be looser. Capital expenditures in the chemical business are centralized. +But in biochem business corporate staff need not be involved. --THE EXPERIENCE OF JAPAN +50's the Japanese electronics industry was fairly small and lacked an indigenous technical base. +Tube-manufacturers viewed it as a mixed blessing (raised the issue of whether they should cannibalize their own products), there was no such dilemma in Japan. There was little to protect. +The japanese had little to protect, a great deal to gain and a willing source of supply of the missing ingredient - technology. They moved with dispatch and the rest is history. +The message is that if the incentives are there , and are seen to be there, companies can manage through transitions; requires starting early, because skills and culture have to change. --RESPONDING IN TIME +Anticipation is the key. +The less time it has , the more money it will have to spend to accomplish the transition. +Addressograph tried to move the company out of electromech into electronics almost overnight. Result = bankruptcy. Can't make culture change that fast. +Shrewdly, Monsanto began turning its back on businesses w/$1Bil invested and moved instead into more promising areas like biotechnology. Then came small venture investments and acquisitions over a period of time. Did not try to mix the old and the new skills, and they didn't try to make the switch overnight but started the transition early and slowly. Now the group is set up basically as an independent, stand-alone business. Today, these investments are beginning to pay off. +Too often companies do too little too late. They know something is on the horizon but can't muster the will to face it. Any they have pride. Pride that borders on stubbornness. +Germanium transistors, Transitron. Silicon? The Bakalars made the same mistake Am. Viscose did when it tried to hedge on both rayon and polyester. Since both kept their bets small on the new technology, they never saw its true potential until it was too late. +Tried diversification. +It tried making integrated circuits only to find the market always one step ahead. --DEFENDER HUBRIS +Defender hubris. Bad situation worse by committing a fistful of errors in a pattern that is common among defenders under attack from new tech. +First common error is to believe that an evolutionary approach to technology will be good enough. +Executive, like many others, believes that statistically if you bet "no" most of the time you win. So they don't bet on discontinuities. Caveat innovator. Because the evolutionary approach is doomed to fail and cannot withstand the enormous rapid changes brought about by discontinuities. --TECHNOLOGICAL HEALTH +Hubristic error #2, is assuming you will have ample early warning about a coming discontinuity if you understand present technology, customer needs and competition. +Study S-curves, tech limits and perf. parameters. Understand where their own technology can go or what it will take financially to get there. +Confuse measures of economic health w/ measures of technological health. Analogy is when sick. Tell I am sick by touching my forehead and feeling, by then I probably should have been in bed hours if not days ago. +Thermometer accurate early-warning device, enabling me to take corrective action. +Most companies don't know how to measure their technological health, they measure their economic health. Economic health is a result of things that essentially are independent of the underlying technological health of the business. +Manufacturer can reduce unit costs by building a larger plant and spreading costs over a larger sales volume. An alternative is to wield the ax, cutting out the staff and perhaps reducing R&D. +For a while profits may improve. But these are transitory rewards. What isn't being addressed is the company's technological health. Like having a hot toddy when you feel a cold , or drink coffee when you are drowsy. You feel good for a while, but it is only symptomatic relief. What is worse, such actions delay a correct prescription. --KNOWING YOUR CUSTOMER +When a company is convinced it understands what its customers want. +Do companies understand customers? not accurately enough to know what those customers will do when approached by discontinuity in products. +Did not want plain copies- carbon was plenty good they said until they could get plain-copies reliably and cheaply. Same w/ diapers, mini TV's , CD, Vid-cam +So if the customer doesn't know what he wants until he gets his hands on it. +Each products has multiple performance parameters, some of which are in competition with one another. +Often a complex relationship between what the customer wants and what the product can deliver. +Discontinuity, when it comes, not in the main market sector, where a company knows the most about its customers' needs. It will probably come in the a niche. +Discontinuity may not start there. It may well start in a niche where the company is not looking as hard as it can, and in retrospect as hard as it would have liked. So knowledge of the customer is illusive at best and misleading at worst. --DEFINING THE MARKET +Error #4 is wrongly defining the market. Tricky in stable times, incredibly difficult in discontinuities. +Through transitions, easier to misinterpret the market. Without the right data about the potential of rival technologies they don't have a chance. +Error #5 Companies overestimate their ability to see discontinuities coming because they believe they understand their competitors. +From a smaller company armed with stealth, capable of high technical productivity and unhindered by vested interest. +Trouble with trying to anticipate discontinuities by watching competitors is we usually watch the wrong ones. +May not be easy to assess or reach them if it is based on an entirely different skill base and science. +Most companies think they can react fast enough, this is yet another error #6. Contrary change occurs gradually only for a limited time period - until the attacker's product is economic in the customer's eye. At that point evolution ends and revolution begins.