Change Management Assignment 1
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Transcript of Change Management Assignment 1
Assignment # 1
CourseChange Management
TopicDisruptive Change in Computer Hardware Industry
Submitted by:Shabir Naqvi
Muhammad MohsinRaphay Faheem Ali Raza Anjum
Immad Azim
Dated13 October 2015
National University of Sciences & Technology (NUST)NUST Business School
EMBA 2K14
Question #1:Do you agree with the opinion expressed in the article? Is disruptive change beneficial for an industry? Give justification.
Answer:The article talks about how the disruption is necessary for industries and businesses to
evolve and to explore new markets. Taking into perspective of history, past cases of
industries that were disrupted and sketching an impeccable diagram in the minds of the
readers, the article revolves around the theory presented by the Harvard professor and
businessman Clayton Christensen and his book ‘The innovators dilemma’.
“If an established company doesn’t disrupt it will fail, and if it fails it must be because it
didn’t disrupt”. (The New Yorker Thinks Disruptive Innovation Is a Myth, 2014)
A disruptive innovation is an innovation that helps create a new market and new values,
and eventually disrupts an existing market and shifting an earlier technology. We agree to
the opinion expressed in the article as a sustaining innovation does not create new
markets or networks but rather only evolves existing ones with better value, allowing the
firms within to compete against each other. There are multiple reasons to failure of the
firm and Christensen mainly focused on why companies fail. Despite of multiple reasons
of failure such as external environment, delays in switching technology, labor unions
(Such as in the case of US Steel), wrong hiring or basic question on the wrong strategy
like in the case of Morrison-Knudsen.
Many people believe that the simplistic idea that an established firm fails because it does
not "keep up technologically" with other firms. However, author has shown that this
simplistic hypothesis is wrong. Christensen argues that disruptive innovations can hurt
successful, well-managed companies that are responsive to their customers and have
excellent research and development. Small start-ups firms invade into the market with
their new networks and completely change the dynamics of the industry. In the end
established players regain their position.
In order to support the disruptive innovation we can see that the author also discussed
about the case studies starting from hard disk, which was first made by IBM in 1955,
however in the war of making 5.25 inch floppy disks, Micropolis had a disruptive leap
along with other companies but Segate took the major chunk as they made it to 3.25
inches disk. The hard drive industry appeared to be gone to the manufactures that were
good at incremental improvements of disruptive new formats.
Moreover, hydraulic excavators also wiped out the mechanical shovel manufactures back
in early nineteen as this disruptive innovation came into the market. Similarly, innovation
of discount stores as a new organizational model of departmental stores, pushed the big
departmental stores to open new independent organizations of discount stores and those
who ran the these models parallel were failed. Comparably, minimilling technology in the
Steel Industry as disruptive as it cut down the cost radically but challenging the disruptive
dilemma gave US Steel an honor of being the largest producer of steel.
Disruptive innovation theory cannot be more correct on the introduction of asset backed
securities innovated in the financial market that led to the financial crisis and busting of
the dotcom bubble. Their mortgage backed securities, CDOs and subprime mortgages are
considered as a disruptive technology. This time disruption created panic in the society
and it led to failure.
The article distinguishes between service industries and professions such as doctors,
teacher’s vs the industries that produce tangibles and highlights how the service industry
has obligations towards their customers which “lie outside the realm of earnings”
compared to businesses, solely for the purpose of its earnings. This leads to the reason
why disruptive innovation is not applicable to these professions as he perceives these
professions to be hard to put up for experimentation. But he still recommended business
schools to have ‘heavy weight innovation’ teams to logic his disruptive innovation.
The articles also points out towards the fact that “Companies that were quick to release a
new product but not skilled at tinkering have tended to flame out”. If we look around the
different industries today the theory of disruptive innovations seems real. We see many
firms getting out of the business or failing because they didn’t disrupt and if they don’t
disrupt they will fail. Taking an example of computers, Minicomputers were originally
presented as an inexpensive alternative to mainframes and mainframe manufacturers did
not consider them a serious threat in their market. Eventually, the market for
minicomputers became much larger than the market for mainframes.
Lastly, the disruption theory was meant to be predictive in many cases but it did not work
out in case of Apple Inc.’s iPhone, however it doesn’t make it a fail theory. We still
believe in this theory Christenson’s research has established some ground breaking rules
that can define why firms fail.
Is Disruptive change beneficial for an industry?
Yes, but not an unconditional one. We consider disruptive change beneficial for
industries as it allows companies and even the overall industry to tap into the markets and
segments which they might have completely neglected or overlooked. Driven by the
thirst to grow and the outlook of the new segment, these disruptive innovation forces
companies to study and understand the needs of those untapped segments for future
business growth e.g. of main frame computers and PC’s.In his book Rifkin traces a new
type of economic system resulting from an abundance of goods and services that are
increasingly cheap: “This is the first new economic system to emerge since the advent of
capitalism and socialism in the early nineteenth century. It is going to dramatically
impact our lives. The precipitating agent, the trigger is something called: zero marginal
cost.” While economists have always welcomed a reduction in marginal cost, they never
anticipated the possibility of a technological revolution that might bring marginal costs to
near zero, making goods and services priceless, nearly free, and abundant, and no longer
subject to market forcesi.
Some of the main benefits of disruptive innovation could be clubbed in the belowii:
1. It can help companies to expand their market through innovation with new and
existing products and services.
2. Companies can identify the areas of process and structural improvements.
3. Companies can identify their leaders for present and future.
4. Future opportunities become clearer.
5. Culture of the companies evolves as a learning community that welcomes change
instead of fearing it.
Question # 2:
To assess the industrial evolution and landscape, strategies and actions of main organizations, antecedents and consequences of the adoption of the disruptive change with respect to the Computer Hardware industry.
Answer:
The computer hardware industry provides a broad range of products. These include
everyday items used in homes, businesses, and schools, such as desktop computers,
monitors and keyboards: laptop computers; and peripherals like printers and scanners; as
well as specialized or industrial items such as webcams, ATM machines, or data storage
devices used by corporations, large and small. A rapidly growing segment of the
computer hardware industry is in multipurpose handheld communication devices, such as
smartphones and tablet computers which allow consumers to have phone conversations,
send electronic text messages and e-mail, surf the Internet, or access media.
Evolution and Landscape:
The computer hardware industry has evolved in an intense fashion over the decades, as
market players are forced to swing strategies and product lines in order to center where
the market demand is most focused. This can be easily seen from the transition of
mainframe supercomputers in the 70’s, to smartphones, progressively fast personal
computers, mp3 players with gigabytes of storage, and PDA cell phones today. This is an
industry whose players have had to adapt quickly in order to match the constantly
changing market demand.
Strategies and Actions of Main Organizations
Marketing Strategieso Price leadership: All corporations in this industry seek to offer very low-
cost computing models, in order to pronounce the affordability of a new
PC to customers. This includes special discounts and instant or mail-in
rebates. Other options such as leasing or financing are used to increase
product affordability. Further, vendors often advertise discount PCs, when
they are purchased with a signed year-long or multi year PC-related
service contract.
o Establishing strong relationships with suppliers: Often this includes
signing exclusive long-term agreements with suppliers of PC components
or peripherals. Vendors who employ this strategy can see a drop in
bottom-line cost for the most expensive of PC components from
purchasing in bulk quantities. This savings is then used to drop product
prices and gain market share.
o Diversification: Diversification into PC-related technologies and
becoming a “one stop shop” for all customers PC needs. The offering of
PDA’s, printers, copiers, faxes, high speed internet access, and other home
or small-business technologies has allowed many PC vendors to drop
prices in main models, and recover this revenue through these related
peripheral sales.
o Alliances and joint ventures: Vendors often Sign deals with software
vendors in order to bundle their products with PC systems. This software
can be installed as a free or free-trial product, which increases the
perceived value of the PC vendor’s product.
o Outsourcing: Various product construction and customer support
processes are shipped to developing countries where lower employee
wage requirements allow companies to reduce overhead.1
o Deals and trade-ins: Older model product trade-in programs allow
vendors to refurbish and resell PCs, while offering discounts on newer
models. As a bonus, the company is able to promote its environmental
responsibility leadership.
1 “Dell Recalls Tech support after complaints” ©2003 EcommerceTimes.comhttp://www.ecommercetimes.com/perl/story/32248.html
o Corporate contracts: While highly lucrative, the signing of exclusive
agreements with enterprise customers to supply and support their IT
computing needs is extremely competitive. These agreements are signed at
discounts for both parties involved, and aims to form a mutually beneficial
financial relationship between firms.
o Aggressive marketing tactics: To increase brand awareness, PC
Companies tend to market hard to end-users via television. This has
become a necessity as prices and product models change quickly.
Business Strategieso Dell developed Dimension PC for home and small business market,
OptiPlex and Precision PCs for small Businesses and PowerEdge model
for enterprise environment users. It also developed Axim PDAs for power
users and printers A9XX for home and small business clients.
o HP produced Pavilion and Presario PCs for home and small business users
whereas it developed ProLiant and Integrity PCs for enterprise. It also
produced DX300 PC as Corporate workstation. Jornada PDA was
developed for power users. InkJet printers were produced for Home /
Small Business and LaserJet printers were developed for Home / Small
Business / Enterprise.
o IBM: it produced following for specific users/ market as mentioned
against each:
PCs ThinkCentre Home / Small Business
IntelliStation Corporate Workstation Servers eServer Enterprise
pServer iServer
Globalization:o Major market players of the PC Hardware industry have already moved to
position themselves into emerging global markets. IBM, H-P and Dell are
already deeply rooted with customers in Europe, Japan, and Indo-China.
As these vendors see market saturation occur in the US, with annual PC
sales beginning to level out, they have been quick to think globally in an
effort to maintain company growth.
o Moreover, as developing countries take aim at narrowing the gap between
themselves and their developed counterparts, their desire to integrate
information systems for efficiency and communication gains becomes
evident. Today, major gains in the governmental sector of many
developing nations are reaping the increased savings and efficiency by
using information systems for communication and collaboration by its
governmental employees. Also, in Chile, Brazil, Peru, and India
innovative uses of networked information technology bring the promise of
a better future for their people.
o As China recently surpassed Japan as the second largest PC market in the
world, American PC vendors were hard at work making a name for them
in this potential goldmine. The pull of emerging markets on the global PC
industry is such that vendors are in a race to develop a presence in these
markets before domestic vendors corner them. China's top PC vendor
Legend captured 9 percent of the market, as it saw its market share grow
by over 100 percent since the year before.
Customer Relationship Managemento CRM Management System represents a huge conglomeration of
Information Technology for the purpose of increasing speed and cutting
costs for any computer producing organization. A state of the art CRM
system was developed and deployed through IT by IBM which hold great
returns for it in the future. Further, it helps IBM form better relationships
with its customers, whether corporate or consumer.
o Free Online Support to Customers is another strategy tool being used by
computer manufacturing organizations for building customer base.
Brand Powero Dell physically manufactures none of its products – it is completely
removed from the fabrication process. Although the company does build
its own computers (including build-to-suit computer systems), it purchases
all of its products’ components directly from manufacturers. The company
is able to leverage its muscle by buying components in large quantities,
while commanding steep discounts. After combining and re-branding
components into new products, Dell markets them to end-users and
corporate clients. Further, through its strong relationships with component
and device manufacturers, Dell is able to reach exclusive agreements with
peripheral manufacturers that allow Dell to market select products to
customers. Such a relationship is productive for both Dell and peripheral
manufacturers because of Dell’s strong brand recognition, which the
company fostered through heavy TV and media marketing investment.
Below is a brief overview of just a few deals currently offered by Dell,
because of the company’s numerous corporate relationships:2
The company now offers deals with Netflix – an online movie-
rental venue, where customers can rent free DVD’s with the
purchase of a Dell system with a DVD player
6 Months of AOL Membership Included with purchase of a Dell
PC.
Over a dozen KODAK products are available directly for purchase
from DELL
The company offers various models of both Canon and Lexmark
printers
An agreement with McAfee, a PC security software vendor,
enables Dell to offer Antivirus tools at 35% off retail price.
Further, Dell is allowed to partially re-brand McAfee’s software
under the Dell company name.
The Direct Model:
o This model is the invention of Dell Inc. Removing retailers and sales
vendors from the value-chain equation enabled Dell’s company to reap 2 Dell Home & Home Office Partners and Programs. http://www1.us.dell.com/content/default.aspx?c=us&cs=19&l=en&s=dhs i http://www.intelligenthq.com/innovation-management/the-disruption-machine/ii http://vertess.com/2014/5-benefits-of-disruptive-innovation/
more financial rewards. IBM, Compaq and others tried to follow this
model in various modified forms to accrue similar results as that of Dell.
Leadership on the Web
o This again is the model used by Dell first to be closer to customers and
others followed.
Hire Ahead of the Curve
o Dell started a policy that when the human resources department considers
employee applicants, that applicant’s future role in the company should be
considered, not simply what the company needs personnel for today.
Further, employees who are moving out of the company should be
prepared to consider and recommend a suitable qualified replacement.
Forming Alliances
o Dell’s strategy for forming business relationships with only a handful of
valued component suppliers have enabled his company to maintain high
inventory velocity and turnover rates.
Redefine/Define
o Dell developed a basic thesis:
“The Internet will fundamentally change the way that
companies do business through its ability to enable people to
conduct low-cost, one-to-one customer interactions with rich
content.”3
Supply Chain Transformation
o The use of Electronic Data Interchange (EDI) allowed Dell to redefine the
relationships it has with its suppliers, and dramatically increase the
velocity of inventory (VOI) inside the company. VOI is described as the
speed at which inventory moves into the company and out to the customer,
and through increasing the company’s VOI, Dell has redesigned the
company’s supply chain structure to cut costs and increase efficiency. Dell
restructured its value chain by using EDI to create a direct link with its
3 Direct From Dell: Strategies that Revolutionized an Industry. 1999. Michael Dell
suppliers, communicating with them up-to-the-minute inventory status and
requirements throughout Dell’s global operation.
Culture
o Dell contributes the majority of its success to the people that work there.
Senior management has worked endlessly to “engender a sense of personal
investment in all employees.”4 This boils down to three major culture
tenets: responsibility, accountability, and shared success.
o Create a Company of Owners: Senior management fosters a feeling
of mutual responsibility amongst employees by creating a company of
owners. This means that every person in the company, at every level,
thinks and acts like an owner.
o Learn Voraciously: Learning is another important cultural value
at Dell. Employees are encouraged to approach their jobs from the
standpoint of asking important questions: “What would make my job
easier, more efficient, successful or meaningful?” Management spends a
considerable amount of time listening to what their employees answer.
o Encourage Smart Experimentation: product groups, along with
research and development teams are encouraged to experiment with new
types of innovation. Instead of telling employees, “Feel free to innovate,
just don’t screw up!” managers create a safe atmosphere for failure,
because important lessons have often been learned at Dell because of past
failures. The company culture at Dell is not focused on what succeeded in
the past, because of the dynamic nature of the market.
Linkage to Suppliers:
o Dell’s close relationship with component vendors is an important key in
considering the overall success of the company. Intimate relations with
suppliers are the key to Dells’ success.
o Dell’s company success can be summarized as under:
Customer Integration
Vendor Reduction and Integration
4 Direct From Dell: Strategies that Revolutionized an Industry, 1999. Michael Dell.
Process Outsourcing
Increased Product Line
Process reengineering
Disruptive Changes
o Personal Computers: PCs were a turning point in computer hardware
industry and as soon as people got awareness about personal computers
the sales across the computer industry grown exponentially. And all the
big giants like IBM, DELL, Compaq, Asus etc. took the advantage and
invested in personal computers and it helped them a lot to not only sustain
their market position but they also increased their revenues significantly. It
was Dell only who took advantage of personal computers most by using
combination of Direct Model and customization across personal
computers era.
o Microprocessors: Disruptive technologies have tendency to rapidly push
aside market leaders or marginalize their market positions. Clayton
Christensen’s 1997 book The Innovator’s Dilemma illustrates that how
Intel’s 8088 microprocessor, the hydraulic excavator and a succession of
computer hard drive technologies revolutionized markets with major
changes in market positions for suppliers. Initially every organization was
using its own or microprocessors and other hardware in computer
hardware industry. But emergence of Intel 8088 microprocessors not only
help Intel to become a industry leader but other computer industry
organizations like Dell, Apple , Compaq and HP also changed their
strategies and instead of investing on their own microprocessor almost all
of them started to collaborate with Intel and now 99% of world personal
computers have Intel’s microprocessors.
o Internet: Internet is one of the most disruptive innovations of last century.
Keeping all the innovations in computer hardware industry aside and
internet on side still internet influence more the entire computer industry.
It was the chain of innovation across communication equipment in
computer industry which eventually gave birth to internet. It was the Dell
first who perceived the value of internet first and emergence of internet
has a significant role in supply and chain model of Dell. Dell leveraged the
importance and utility of internet by enabling different people across the
globe to their customized PCs purchase orders.
o Smart Phones and handheld devices: We have discussed above that how
personalized computers helped the computer industry to grow further but
it also forced companies to change their strategies from only B2B model
to B2C model. But as per Moore’s that the size of computer hardware will
shrink over time i.e. number of transistors on one inch square will be
doubled every year. Due to other innovations like internet and telecom
industry mobility is another factor which is making consumer to go the
product which have same features or specification but smaller in
dimension. The desire of mentioned capabilities across personalized
computer and era of personal computers to laptops to notebooks further
pushed the hardware industry to a new era of smartphone and tablets. On
one side its helping people take leverage of computation devices with
mobility but on other hand it also proved to be a threat for personalized
computer. Most of organizations have observed decline across the sales of
Personal computers and increase in the sales of smartphone and handheld
devices. Due to this paradigm shift almost every big giant have already
invested in to serve their customer with ever changing demands. Apple
and Samsung are the organizations who harvested most out of this new era
but the old organizations like Dell, HP , Microsoft is now investing in
subject field. Furthermore smartphone and tablet industry is being “Many
Screens” where we ll go from here is the multi-screen world. In the age of
the Personal Computers, it was all about one primary computing screen.
Now it’s about many. Consumers will have two or three or four screens in
their lives and they will want to use all of them as a part of their
computing solution. The future is not about one screen; it is about many,
and the sooner the industry will embrace this reality, the sooner companies
will stop worrying about the shrinking growth of one segment and begin
thinking about the growth of another.
Globalization:
o Fundamental changes occurring on the global landscape as a result of the
convergence of IT innovation and public policy shifts reducing barriers to
movement. These changes are forcing us to reexamine some of the most
basic assumptions we have about our institutions, whether we are talking
about corporations, schools, government bodies or social institutions. In
effect, we are seeing the emergence of a new common sense model,
requiring a new, and often quite counter-intuitive, set of assumptions.
Similarly in computer hardware industry almost every organization like
Dell, IBM , Microsoft have changed their basic assumptions like now Dell
don’t have customers only in USA it’s the whole world to whom they
have to offer their services. Now most of the organization have opened
their offices worldwide like Microsoft have their operations in more than
20 countries, where people work across different societies , cultures ,
timings with a single goal of progression of their organization. Further
globalization have forced organization to look after following aspects as
well
Cost reduction by opting for global products (Some organizations
shifted their production facility to China)
Captive Facilities by outsourcing different departments to different
countries (Most of the organizations have outsource their call
centers to India like Dell)
Fragmented strategies for individual markets across globe (Apple
have different products for different regions of the world like
Iphone 5C was particularly focused for sales India)
Accelerated capacity building by utilization different offices across
the globe
Bio Technologies:
o Bio technology is another disruptive innovation of last century and this
innovation is going to impact computer industry as well. Every computer,
gadget, smartphone or tablet consists of alot of different components and
these components are manufactured at industrial level. People have
different views about industrial level production few people appraise this
phenomenon but there are a lot of people who criticize this phenomenon
as well due to its harmful impacts over society. Now people in computer
industry have started to think over these concerns and they have decided to
collaborate with different bio technology firms for betterment of
environment and society.
Nano Technology:
o Size of the gadget has always been remained a concern for customer. And
this concern is even getting more weightage just because of mobility and
innovation in telecom sector. Now people want to carry smaller gadgets
with them either its smartphone its notebook or it’s a tablet, smaller will
be the dimension most preferred product it will be keeping in mind no
compromised was done over performance of the gadget. Applications of
nano technology in computer hardware not vast but Seagate a big name in
hard-disk manufacturing have utilized the nano technology upto some
extent and have reduced the size and speed of hardisk significantly and
they were the first on in computer hardware industry who introduced SSD
hardisks. And introduction of SSD hardisk have helped them to next era of
storage devices.