DHV'04 DHV 2004 Learning and Change as elements of a Dynamic Strategy

DHV'04 This Afternoon Organizational learning –Experience effects –Competing in time Dynamic Strategy Class discussion

DHV'04 Approaches to Individual Learning Learn before doing –Market research, analysis, benchmarking Learn while doing –Iterative experimentation with multiple low cost product probes Learn after doing ( by someone else) –Build brand, distribution, cost, quality advantages with resources in place

DHV'04 cumulative volume cumulative volume $ $ C n = C 1 n -a The Experience Curve

DHV'04 Log cost log cumulative volume slope = %change in cost % change in cumulative volume 70% 85% The Experience Curve

DHV'04 Annual rate of market growth Relative market share High Low star cow ????? dog The BCG Model

Time Performance Measurement Break even time New product- revenue plot Time to market Half life system

DHV'04 Revenue Profit time Product Life Cycle Breakeven Time

Revenue >6 New Product- Revenue Plot Years

1.0 Effort Time 0.5 Leverage of Fast Development

DHV'04 The Half-Life Curve rejects time rejects r = r o 2 -t/T

u Planning cycle and product life cycle u Constrained innovation u Frequent product introductions u More times at bat Faster Development Cycle

DHV'04 The Innovation War: The acceleration trap

DHV'04 The Innovation War

DHV'04 Is there a First Mover Advantage? Studies since 1988 have mixed conclusions –Survivor bias is a problem with some of the analysis. Successful pioneers (first movers) develop enabling unique resources –Ginger Bread Strategy –Dimensions of competition –Network externalities –Brand equity Market timing is important

DHV'04 Early Entrant Or Follower EARLY ENTRANT FAST FOLLOWER Easier Share Many Entrants Higher Valued Share Tech. May Change Less Price Pressure Resource Risk Of Success Experience Effects Growth Delayed Or Absent Deter Entrants Critical success factors May Change

DHV'04 Innovation Model What Can Be Latent Demand Profit Strategic Value BU Project R&D Plan

DHV'04 S-Curve: Technology Diffusion Cumulative Adopting Firms Pioneers Followers Late Adopters Technology Substitution Dominant Design Diminishing Returns

DHV'04 PROGRESS Substitution TIME

DHV'04 Implications of staying with current path Re-evaluate unique resources Renewal - innovation Slow Growth - competition & consolidation Cost Of Wrong Call Vision- organizational alignment Investment Profile- destroy value Organizational Structure- wrong skills Transition stage

DHV'04 % Substitution Time Substitution Across Market Segments

DHV'04 Product and Process Innovation Product Innovation Process Innovation time Rate of Innovation

DHV'04 Technology Progression

DHV'04 Takeaway Experience and speed as examples of organizational learning supporting corporate strategies Natural limits of focusing on a single dimension of competition