The Innovator's Dilemma When New Technologies Cause Great Firms to Fail

[silvrsvt]

FYI, folks, FPVFalcon has been suspended for two weeks.

 

Could he be an old friend? Seems very similar to him...

[papilgee4evaeva]

Could he be an old friend? Seems very similar to him...

 

If it's who I think you're thinking about, it doesn't sound that much like him to me.

 

Could be a different one altogether though.

[fabfordeb]

^{well i'm a little partial since the author of the article is my cousin and i heard him talk about this subject at a family gathering many years ago. he's the or one of the most highly acclaimed business consultants in the world today. what i took from it is the company who is resting on its laurels with it's current success and hasn't been innovative in planning for the next major change loses out to an upstart who has a better concept.}

^{ford has done pretty well on this with it's current product, but othe oem's are catching up.}

^{one example could be the ranger. once highly successful it went on and on in it's current form until it died. it was a great truck, but if sometime during that time frame they had come up with an equally capable small truck that appealed to more people and got 35 mpg on the highway with more power like their other models are doing, maybe they would have created an even larger market and be selling tons of them today.}

Edited July 30, 2012 by fabfordeb

[silvrsvt]

^{one example could be the ranger. once highly successful it went on and on in it's current form until it died. it was a great truck, but if sometime during that time frame they had come up with an equally capable small truck that appealed to more people and got 35 mpg on the highway with more power like their other models are doing, maybe they would have created an even larger market and be selling tons of them today.}

 

The market moved on from small pickup trucks, just like it did with the personal coupe market of the 1970's....

[RichardJensen]

^{one example could be the ranger. once highly successful it went on and on in it's current form until it died.}

Arguably, investing a large sum of money on a declining/shrinking segment because it was once very profitable (e.g. compact trucks, BOF SUVs) is the same sort of backward looking philosophy that leads companies to miss new markets.

[aneekr]

Toyota? Seriously? What did they innovate other than hybrids?

 

Process oriented innovations - techniques in production planning, logistics, supplier relations, etc. - are arguably the most noteworthy innovations from Toyota. The company's principle of applying kaizen throughout its operations has been imitated but no automotive OEM does it better. James Surowiecki wrote about this in a New Yorker article a few years ago.

 

Nonetheless, Toyota has demonstrated product innovation outside gasoline-electric hybrids, as well: powertrains (e.g., D4-S fuel injection system, electrically actuated VVT, first production eight speed AT), telematics (G-Book, Entune), chassis (KDSS), and lighting (LED headlamps on mass market cars) among other areas.

[akirby]

Process oriented innovations - techniques in production planning, logistics, supplier relations, etc. - are arguably the most noteworthy innovations from Toyota. The company's principle of applying kaizen throughout its operations has been imitated but no automotive OEM does it better. James Surowiecki wrote about this in a New Yorker article a few years ago.

 

Nonetheless, Toyota has demonstrated product innovation outside gasoline-electric hybrids, as well: powertrains (e.g., D4-S fuel injection system, electrically actuated VVT, first production eight speed AT), telematics (G-Book, Entune), chassis (KDSS), and lighting (LED headlamps on mass market cars) among other areas.

 

Ok, I'll buy that. I was thinking more in terms of products.

[SoonerLS]

Process oriented innovations - techniques in production planning, logistics, supplier relations, etc. - are arguably the most noteworthy innovations from Toyota. The company's principle of applying kaizen throughout its operations has been imitated but no automotive OEM does it better.

As I understand it, the foundational concepts behind kaizen were "invented" by an American (whose name escapes me) who took it to the Japanese companies after the Detroit 3 ignored him. I'm not sure how innovative you can claim to be when you're really only applying what someone else taught you to do...

Edited July 31, 2012 by SoonerLS

[SoonerLS]

Double post...

Edited July 31, 2012 by SoonerLS

[RichardJensen]

As I understand it, kaizen was "invented" by an American (whose name escapes me)

W. Edwards Deming.

[silvrsvt]

As I understand it, the foundational concepts behind kaizen were "invented" by an American (whose name escapes me) who took it to the Japanese companies after the Detroit 3 ignored him. I'm not sure how innovative you can claim to be when you're really only applying what someone else taught you to do...

 

You bring up an interesting point here....it seems like (at least in my narrow view of the world) that in general Asians are very hard working and push their children to do well in school, but seem to lack any creativite processes or even inventive processes. From what I see, all that they do (at least from a Japanese and even Chinese perspective) is take a product and copy/improve upon it instead of innovating with it. I don't want to sound dismissive, but outside of gunpower, what has come out of Asia that has been groundbreaking?

Edited July 31, 2012 by silvrsvt

[Edstock]

but outside of gunpower, what has come out of Asia that has been groundbreaking?

 

Asia's a big place. Outside of gunpowder, try mathematics, from India.

[silvrsvt]

Asia's a big place. Outside of gunpowder, try mathematics, from India.

 

Well your also re-enforcing my point....there hasn't been much out of there in the past 500 yrs plus...

[aneekr]

Well your also re-enforcing my point....there hasn't been much out of there in the past 500 yrs plus...

 

Asian companies certainly know how to come up with processes, techniques, components, and products for which patents are granted by the USPTO. Below is the list of the top 10 utility patent recipients in 2011. Companies based in Asian countries comprise the majority of the top 10, and half of the top 50 (though U.S. based IBM ranks highest by a comfortable margin).

 

Of course, patents ≠ innovation, and a good case can be made that that certain categories of patents, especially software related, hinder innovation. But the assertion that "there hasn't been much out of [Asia] in the past 500 years plus" seems exaggerated.

[fabfordeb]

Arguably, investing a large sum of money on a declining/shrinking segment because it was once very profitable (e.g. compact trucks, BOF SUVs) is the same sort of backward looking philosophy that leads companies to miss new markets.

 

true, but the point is that the market may have died due to the product, pricing close to entry full size, mpg not much better than full size, long in the tooth designs. there might be a new market for small trucks worth the investment if they were much more efficient with improved performance.

[RichardJensen]

much more efficient with improved performance.

One of the challenges there is highway mileage & Cd. You don't exactly have a hard upper limit on highway mileage, but it becomes increasingly difficult to eke out substantial FE gains on the highway while keeping a useful pickup form-factor. You could get into the mid 30s, perhaps, with a Ranchero-type vehicle, but it would make for a pretty poor truck.

[xr7g428]

Actaully it isn't the Cd, that kills you it is the frontal area that you multiply by the Cd. There is about 10 square feet of difference between an F250 sized truck and the last Ranger. That one change can account for almost 10mpg at 65 mph.

[fordmantpw]

Actaully it isn't the Cd, that kills you it is the frontal area that you multiply by the Cd. There is about 10 square feet of difference between an F250 sized truck and the last Ranger. That one change can account for almost 10mpg at 65 mph.

 

10 MPG? Isn't that a bit of a stretch? I mean, with reports of 16-17 mpg in the SD with the 6.2L, that's 26-27 mpg in a Ranger with the 6.2. Considering the 3.0L couldn't get that on a good day, I'm having trouble believing it's a 10 mpg difference.

[RichardJensen]

Actaully it isn't the Cd, that kills you it is the frontal area that you multiply by the Cd. There is about 10 square feet of difference between an F250 sized truck and the last Ranger. That one change can account for almost 10mpg at 65 mph.

I dunno. I can't imagine that the Ranger has that much more frontal area than the Escape.

[Edstock]

I dunno. I can't imagine that the Ranger has that much more frontal area than the Escape.

 

Indeed, but it probably has a much higher Cd, with the open cargo box, than the Escape. But, I could be mistaken.

[fabfordeb]

the ranger is just an example. hopefully Ford did the innovative thinking into the future possibiliites and determined something new wasn't worth the investment. that's the point of the article, if they didn't, the opportunity passed them by and if someone else does it the ranger product has lost out. look at how much more efficient other new vehicles are with as much or more power today than the same models were just a few years ago.

[akirby]

the ranger is just an example. hopefully Ford did the innovative thinking into the future possibiliites and determined something new wasn't worth the investment. that's the point of the article, if they didn't, the opportunity passed them by and if someone else does it the ranger product has lost out. look at how much more efficient other new vehicles are with as much or more power today than the same models were just a few years ago.

 

Sometimes it's cheaper to NOT make something. Ford saved a ton of money killing the old Ranger. If they didn't have the F150 and the small truck market didn't keep failling when gas prices went up there would have been a better business case for keeping and/or upgrading it.

 

You can't make every possible product - you have to pick and choose.

[Biker16]

^{well i'm a little partial since the author of the article is my cousin and i heard him talk about this subject at a family gathering many years ago. he's the or one of the most highly acclaimed business consultants in the world today. what i took from it is the company who is resting on its laurels with it's current success and hasn't been innovative in planning for the next major change loses out to an upstart who has a better concept.}

^{ford has done pretty well on this with it's current product, but othe oem's are catching up.}

^{one example could be the ranger. once highly successful it went on and on in it's current form until it died. it was a great truck, but if sometime during that time frame they had come up with an equally capable small truck that appealed to more people and got 35 mpg on the highway with more power like their other models are doing, maybe they would have created an even larger market and be selling tons of them today.}

 

that is awesome.

 

The market moved on from small pickup trucks, just like it did with the personal coupe market of the 1970's....

 

or maybe the market moved on becuase the Segment stopped adapting to the Buyer, it like saying ford could continue to sell the 1991 escort with a few minor change in 2012 and wondering why people stopper buy the 22 year old car. becuase there were only 4-5 entrant in the class unlike the compact car segment with 10-15 entrants, a general dysfunction in the segment Would result in a overall segment decline, because the incentives to innovate were very weak because of the lack of competition.

 

I will say the descion to make the compact pick up bigger and stronger in the last decade has killed the product.

 

Arguably, investing a large sum of money on a declining/shrinking segment because it was once very profitable (e.g. compact trucks, BOF SUVs) is the same sort of backward looking philosophy that leads companies to miss new markets.

 

but the logic of focus purely on the profitability of the today's market can easily allow you to miss an opportunity for future innovation.

 

the logic that a new Ranger would steal sales from the more profitable F150 is huge waring sign, and that investing in exotic technologies to reduce the weight of the F150 while maintaining capabilities of the current truck is very risky IMO. instead of the logical conclusion to reduce the capability of the F-150 to save wieght and move the SD down to fill that gap, the uses of aluminum to maintain the status Quo, appears like Ford is working too hard to maintain and not hard enough to let the market shrink, in the end the F -series could be like the crown Vic, the last man standing in a shrinking market.

 

IMO their are opportunities for the Transit to replace some F-series variants all ford has to do is to offer them and let the market decide, but if they don't offer it they have created a opening for other entrants to do the same thing.

 

As I understand it, the foundational concepts behind kaizen were "invented" by an American (whose name escapes me) who took it to the Japanese companies after the Detroit 3 ignored him. I'm not sure how innovative you can claim to be when you're really only applying what someone else taught you to do...

 

most Large do not innovate from within but they acquire smaller innovative companies, with the auto industry it is harder to see this , but the tier 1 and Tier 2 suppliers which provide most of the today's technical innovation do this all the time.

 

Example would be Apple buying a Chip designer specifically for the future Iphone andn Ipads. they bought the innovator.

 

You bring up an interesting point here....it seems like (at least in my narrow view of the world) that in general Asians are very hard working and push their children to do well in school, but seem to lack any creativite processes or even inventive processes. From what I see, all that they do (at least from a Japanese and even Chinese perspective) is take a product and copy/improve upon it instead of innovating with it. I don't want to sound dismissive, but outside of gunpower, what has come out of Asia that has been groundbreaking?

 

After the 1st generation the 2nd generation children of Asian immigrants are comparable to their American peers, Cultural Assimilation.

 

Asians are a very innovative people, they just don't advertise it.

 

true, but the point is that the market may have died due to the product, pricing close to entry full size, mpg not much better than full size, long in the tooth designs. there might be a new market for small trucks worth the investment if they were much more efficient with improved performance.

 

the idea that capability must continue to grow has led to a tremendous increase in the mass of compact pickups.

 

an innovator would Try to shrink the capability to match the needs not the dreams of the buyer and work to make the truck true to the what the buyer are looking for which is not to carry 1350 lbs every freaking day. but maybe to carry 750lbs payload in exchange for a lighter vehicle.

 

when you have a compact pickup like the Tacoma with a max payload of 1350lbs, when the "1/2 ton" f150 can max out at over 3000 lbs, you have a issue with this segment.

 

a true 1/4 ton P/U would meet the needs of alot of buyers that have fled into other segments. It is the profitablity of the full size segment that is preventing them from exploiting other options.

[SoonerLS]

most Large do not innovate from within but they acquire smaller innovative companies, with the auto industry it is harder to see this , but the tier 1 and Tier 2 suppliers which provide most of the today's technical innovation do this all the time.

Maybe, but that has nothing to do with what I was discussing.

[xr7g428]

I dunno. I can't imagine that the Ranger has that much more frontal area than the Escape.

 

From what I have been able to find the Ranger had a frontal area of about 16 square feet and the Super duty was 26 square feet. Cd was comparable.

 

Here is tool you can use to see the effects of different variables on fuel economy.

 

http://ecomodder.com/forum/tool-aero-rolling-resistance.php