INTRODUCTION

What is disruptive technology? Why do many companies fail in the face of disruptive technology, while others remain competitive? Why do innovators continue to develop new technology even though they know it might affect the current existing markets and products? How can companies ensure that they remain relevant and competitive, amidst many disruptive technologies entering the market?Well, the answer is not simple or  easy. Many companies such as IBM and Honda have been able to do it. So what exactly do they do? What is their secret? . It is all a matter of strategy, lots of studies, and the ability to identify new markets that have not yet emerged. These are not skills anyone will teach you in a class. It is a matter of opening your eyes and mind to changes and new opportunities.In this book, you will learn what disruptive technology is and the reason why many companies fail initially.In the second part , you will learn how to make your company survive when disruptive technology hits. This book will use examples from some famous and big corporations to help you understand. Are you ready to learn one of the best survival skills for your company? Well, look no further.You are in the right place.

PART ONE: WHY GREAT COMPANIES FAIL
1. HOW CAN GREAT FIRMS FAIL? INSIGHTS FROM THE HARD DISK DRIVE INDUSTRY

The primary role of disk drives is  to read and write the information for computer use .IBM was the first company to enter this industry. By the 1960s, many firms emerged with the sole purpose of producing improved drives that meet customer needs. These firms were very innovative and aggressive. But why did many of them fail? Many of these companies are unable to confront low vision and mobility. With more advancement in technology, many of these companies were unable to find other uses for their products, and thus they failed.The first disk drive was developed between 1952 and 1956 by a team of researchers at IBM. But as IBM continued to produce drives that would meet its own needs, a similar company emerged. A  few more firms also came up with the Plug Compatible Market (PCM) in 1960. These companies sold more enhanced copies of the IBM disk drives to IBM clients at a lower price. In the 1970s, more small companies entered the market, producing disk drives too.

By 1976, disk drives worth $1 billion were on the market. This marked the beginning of fierce competition, rapid growth, and improvement in technology. By 1980, PCMs had become irrelevant, and many companies produced the original equipment market (OEM) to be used in disk drives. In 1976, up to 17 large corporations were competing in this industry, but all of them – except IBM , had either been acquired by another company or had failed. By 1995, 129 companies also entered the industry, and 109 of those failed.Why did they fail? They failed because of the emergence of disruptive technology. However, disruptive technology is exactly   what helped IBM to sustain itself in the market. One example was the size of disk drives:initially, drives were 14 inches in diameter, then they moved to 8, and in the end, they were 1.8 inches in diameter. The 8-inch drive was suitable for minicomputers, but the 5.25-inch drive was not compatible .The latter was more compatible with personal desktop computers.

Between 1980 and 1982, however, desktop personal computers emerged on the market. Many companies and individuals wanted these small and light desktop computers. As a result, the 5.25-inch drive demand went up because they were more appealing and compatible with desktops. Therefore, the sale of 8-inch disks decreased, and companies that were solely relying on its sale for sustainment were kicked out of the market.Some companies have risen because of disruptive technology. Such is the case with Shugart Associates. They entered the industry between 1978 and 1980,  specializing in the manufacturinge of 8-inch drives with up to 40MB capacity. These drives could not be sold to mainframe manufacturers; however, because they wanted drives up to 400MB. Therefore, they ended up selling the drives to mini-computers manufacturers. Their customers, including DEC and HP, had been initially using 14-inch drives.

When offered the 8-inch drive-by Shugart, these companies incorporated it into their system because it was smaller and better. This is how the 8-inch drive became popular among minicomputer manufacturers. By mid-1985, 8-inch drive manufacturing companies were also able to raise this drive's capacity to that required by mainframes. Also, the 8-inch drive was better because the vibrations it produced were less noticeable as compared to 14-inch drives.Within four to five years, 8-inch drives invaded the market, kicking out 14-inch drives. Eventually, every 14-inch drive maker was thrown out of the market. The 8-inch drive was able to thrive because it performed better at capacity and price. On the other hand, the 14-inch drive makers failed because they did not produce 8-inch drives. Any technology company should know that new products may come into the market and make their product  obsolete, they cannot become complacent just because their product is doing well right now.

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2. WHAT GOES UP CAN'T GO DOWN.

Have you noticed that leading companies readily jump towards high-end markets while others experience a great deal of difficulty? No matter how effective, no manager can build a company to enter the market with poorly defined low market ends, which have low profits. Huge companies have been able to sustain themselves because they are willing to leave their loyal customers in search of higher-paying clients. For any company to thrive, it must be ready to attack any product with high performance in the market.Making steel through the use of minimills was successfully commercialized in the mid-1960s. Minimills use different equipment and technology to melt and shape scrap steel to bars, rods, sheets, etc in the manufacturing process.

They are called ‘minimills’ because what they produce is less than a tenth of what is required.Minimills are quite similar to integrated mills, but the scale is the only difference. North America has the most efficient minimills in the world. In the mid 1990s, the most efficient integrated mill required 2.3 labor hours while the minimill required only o.6 labor hours per ton.Building a good minimill was about $400 million, compared to  $6 billion for an integrated mill during this time. Therefore, every industry in North America used minimills to cast and reshape steel. But what is surprising is that none of the integrated mills makers have ever tried to build the integrated mill using the same technology and technique used in minimills.

Why? It makes so much sense to do this because then they could kick minimills out of the market.Many managers of these integrated mills companies are afraid to take the risk, companies like Bethlehem Steel Corp and U.S Steel Corp have closed down because they are no longer competitive. On the other hand, some companies such as USX, an integrated mill maker, improved its machines' efficiency from 9 to 1980 labor hours per ton. Yet despite this, minimills are still what everyone is going for. What seems to be the problem?It is simple. Minimills are disruptive technology. During its emergence in 1960, minimills were  capable of producing quality products. At the time they entered the market, integrated mills were more popular and trusted and could do practically every kind of cast and reshape. The only niche in the market was reinforcing steel bars. Rebar was not something many people wanted, and there were no profits in it.Integrated mills were more than happy to be relieved from the business of reinforcing steel by minimills.

The minimills were not deterred, however. They went for it and established themselves in the steel reinforcing business. They invested in producing high quality and larger bars. By 1990, they were reinforcing steel, but they were also making rods, bars, and angle irons. During this time, the profits were relatively low for these products. Once again, integrated mills were more than happy to be relieved from this work because they were not making any profits.Minimills attacked the market by producing the same products that integrated mills could. By 1992, integrated mills had been driven out of the market, and minimills were dominating it. The most important thing to understand here is that during the 1980s, integrated mills made massive profits by targeting well-paying clients. While it was the right step, they forgot to improve their equipment to produce more and high-quality products at low costs. For this, they went down quickly and were overtaken by other companies

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