"This book addresses a tough problem that most

successful companies will face eventually.

It's lucid, analytical-and scary."
-Andrew S. Grove,
Chairman and CEO, Intel Corporation
ine Re'volutlonary
'_wu; Nati6
m
n-alt3estseTler That I
,i
ChangeCf1l1e-way W':J ""-
-Do ffusiness-
Contents
In Gratitude vii
Introduction xi
pjjrt One: Whq Great [ompanies [In Fail
1 How Can Great Finns Fail? Insights from the
Hard Disk Drive Industry 3
2 Value Networks and the Impetus to Innovate 33
3 Disruptive Technological Change in the
Mechanical Excavator Industry 69
4 What Goes Up, Can't Go Down 89
Part lUJo: Managing Oisruptive lechnnlogical [hilnge 111
5 Give Responsibility for Disruptive Technologies
to Organizations Whose Customers N eed Them 117
6 Match the Size of rhe Organization to the
Size of the Market 139
7 Discovering New and Emerging Markets 165
8 How to Appraise Your Organization's
Capabilities and Disabilities 185
9 Performance Provided, Market Demand, and
the Product Life Cyc1e 211
10 Managing Dsruptive Technologcal Change:
A Case Study 235
11 The Dilenunas of Innovation: A Surnmary 257
The Innovator's Dilemma Book Croup Cuide 263
Index 271
About the Author 287
vi Con ten 1.'
Hum Con Greot Firms Foil?
Insights from the Hard Disk Orive

ONE
W
HEN 1 llEGAN my search for an ans\ver to the puzzle oCwhy
the best fiuns can fal, a friend offered sorne sage advice.
"Those 'who study genetics avoid studying hurnans," he noted. "Be-
cause new generations come along only every thirty years or so. it
takes a long time to understand the cause and efrect of any changes.
Instead, they study fruit fues, because they ar conceived, born,
matuIe, and die all witrun a single day. lf you want to undcrstand
why something happens in business, study the disk drive industry.
Those companies are the closest things to fruit flies that the business
world 'will ever see.'
lndeed, nowhere in the history of business has there been an
indusrry like disk drives, where in technology, market struc-
ture, global scope, and verdea! integration have been so pervJs've,
rapid. and unrelenting. While this pace and complexity might be a
nightmare for managers, rny friend was right about its being fertile
ground for research. Few industries offer researchers the ame oppor-
tunities for developing rheories about how different types of change
cause certain types of firms to succeed or fal or for testing those
theories as the industry repeats its cycles of change.
This chapter sunmurizes the rustory of the disk dlive industry in
al! ts cornplexity. Sorne readers wiil be interested in it for the sake
o history itself But the value of understanding this history is that
out of its cornplexty emerge a few stunningly simple and consistent
faetors that have repeatedly detennined rhe success and failure of the
indusuy's best firrm. Simply put, when che best finns succeeded,
they did so because chey listened responsivdy to their customers and
invested aggressively in the technology, products, and manufacturing
capabilities that satisfied their customers' next-generation needs. But,
paradoxically, when the best firms subsequently failed, it was foc
rhe same reasons-they listened responsively te their customers and
nvesred aggressively in the technology, produets, and manufaeturing
capabilities thar satisfied their customers' ne:)ct-generation needs. This
is one o the innovator's dilemmas: Blindly follovving the maxim that
good managers should keep close to their customers can sometimes be
a fatal mistake.
The rustory of the di5k drive industl'Y provides a framework
for understanding when "keeping close to your customers " i5
good advice--and when ir is noto The robustness of this framework
could only be explored by researching che industry's history in
carefJJ detail. Sorne of that derail is recounted here, and elsewhere
in this book, in the hope that readers who are immersed in the
detail of their own industries will be better able to recognize how
similar patterns have affected their own fortunes and those of their
competitors.
HOW DISK ORIVES WORK
Disk drives write and read infonnation thar computers use. They
eomprise read-write heads mounted at the end of an ann that swing;
over the surtace of a rorating disk in much the s'Jme way that a
phonograph neeclie and arm reach over a record; aluminum or glas;
disks coated with magnetic material; aI least rwo clectric motors, a
spin motor that drives the rotanon ofthe clisks and an actuator motor
that moves the head to the desired positon over t.he disk; and a
4 Why Creat Compaflies Can Pail
variety of electroruc circuits that control the drive's operation and
its interface with the computer. See Figure L 1 for an illustration of
a typical disk drive.
The read-write head is a tiny electromagnet whose polarit)'
changes whenever the direction of the electrical current runrung
through ie changes. Because opposite magnetic poles attrace, when
the polarity of the head becomes positive, the polarity of the area
on the disk beneath the head switches to negative, and vice versa.
By rapidly changing the direcron of current flo,-"ing through the
head's electromagnet as the disk spins beneath the head, a sequence
of posirively and negatively oriented magnetc domains are created
in concentric tracks on the disk' s surface. Disk drives can use the
positve and negatve domains on ehe disk as a binary numeric sys-
tem-l and o--to "write" informaron onto disks. Drives read infor-
maton from disks in essentially the opposite process: Changes in the
magnetic flux fields on the disk surface induce changes in the micro
current f10wing through the head.
Figure 1.1 Pritnary Components of a Typical Disk Driye
Aeluator motor
Controller. other
eleetrone eireuitry
underneath
Aluminum or glass
disk coated with
magnetie material
Oplieal encoder to
ensure clase head
lrack alignment
Spn motor (al
base 01 spindle)
/ Hermele
housing
How Can Creat Frms Fail? 5
EMERGENCE OF THE EARLlEST DISK ORIVES
A tcam of rcsearchers at IBM's San Jose research laboratories devel-
oped the first disk drive between 1952 and 1956. Named RAMAC
(for Random Acccss Mechod for Accouncing and Control), this drive
was the size of a large refrigerator, incorporated [fty twenty-four-
nch disks, and couId srore 5 megabytes (MB) of nfoffi1aton (see
Figure 1.2). Most of the fundamental archtecturaI concepts and
component technologies that defined roday's donnant disk drive
design were also developed at LBM. Tbese indude ies removable
packs of rigid disks (introduced in 1961): the floppy disk drive (1971);
and the Winchester architecture (1973). All had a powerful, defining
influence on the way engneers in the rest of the industry defined
what disk drives .vere and what they couId do.
A, IBM produced drives to meet its own needs, an independel1t
Figure 1.2 The First Disk Drive, Developed by mM
Source: Courtesy of Internacional Business Machines Corporation.
6 1+1y Crear COl1lpanics Call Fal
disk drive industry emerged serving rwo distinct markets. A few firms
developed the plug-compatible market (PCM) in the 19605, 5elling
souped-up copies of IBM drives direcrly to IBM customers at dis-
count prices. A1though most ofIBM's competitors in computers (for
example, Control Data, Burroughs, and Univac) were integrated
venicaUy into the manufacture of their o\Vn disk drives, the emer-
gence in the 19705 of smaller, nonintegrated computer makers such
as NixdOlf Wang, and Prime spawned an original equipmem market
(OEM) for disk drives as well. By 1976 abour $1 billion worth of
disk drives were produced, of which captive production accounted
for 50 percent and PCM and OEM for about 25 percent each.
The next dozen years unfolded a remarkable stor)' ofrapid growth.
market turbulence, and technoJogy':'driven performance improve-
ments. The value of drives produced rose to about $18 billion by
1995. By rhe rnid-1980s the PCM market had become insignitlcanc,
while OEM output gre,," to represent about three-founhs of \Vorld
production. Of the seventeen firms populating the industry in 1976-
a11 of which were relatively large, diversified corporations such as
Diablo, Ampex, Memorex, EMM, and Control Data-all exeept
IBM's disk drive operation had faiJed or had been acquired by 1995.
During this period an additional 129 firms entered the inclustry. and
109 of those also failed. l\side from IBM. Fujitsu, Hitachi, and NEC.
all of the producers remaining by 1996 had entered the industry as
start-ups afrer 1976.
Some have attributecl the high monality rate among the integrated
firms that creared the industry te its nearly unfathomable paee of
technolo:,'icaJ change. Indeed, the pace of change has been breathtak-
ing. The number of megabits (Mb) ofinforrnation rhat the industry's
engineers have been abJe to pack into a square il1ch of disk surface
has il1creased by 35 percent per )'ear, on average, from 50 Kb in
1967 to 1.7 Mb in 1973, 12 Mb in 1981, and 1100 Mb by 1995.
The physical size of rhe drives was !educed at a similar pace: The
smallest avaiJable 20 MB drive shrank from 800 cubie inehes (in.
3
)
in 1978 to 1.4 in .. ' by 1993-a 35 percent annual rate ofreduction.
Fignre 1.3 shows that the slope ofthe industry"s experience eurve
(which correlates the cumulative number of terabytes (one thousand
HoU' Can Great Fimu Fail? 7
Figure 1.3
~
.!2 1,000.00
;g
N
CID
~
e
s
'"
e
o
S2.
i
ca
O>
'" :
100.00
10.00
1.00
Disk Drive Price Experience Curve
1 9 7 ~ ~
~
1985
1990

53%SIOpe/

. ~
..
1994
0.10 -j-----,-----.,.-------,---------,
10 100 1,000 10,000 100,000
Cumulative Terabytes Produced
SOUfce: Data are from various issues of Disk/Trend Report.
gigabytes) of disk storage capacity shipped in the industry's history
to the constant-dollar price per megabyte of memory) was 53 per-
cent-meaning thar with each doubling of cumulative terabytes
shipped, cost per mega byte fell to 53 percent of its former leveL Trus
is a much steeper rate of price decline than the 70 percent slope
observed in rhe markets for most orher microelectronics producrs.
The price per megabyte has declined ar about .5 percent per quarter
for more than twenty years.
THE IMPACT OF TECHNOLOGICAL CHANGE
My investigarion imo why leading firrns found it so difficult to stay atop
the disk drive industry 1ed me to develop rhe "technology mud,lide
hypothesis": Coping \.\'ith the relendess onslaught of technology
change was akin to trying to climb a mudslide raging clown a hill. You
have to scramble wirh everything you've got ro stay on top of ir, and
if you ever once stop to carch your breath, you get buriecl.
8 Vil}' Crea! Compallies Ca/l Fllil
To test this hypothesis, I assembIed and anaIyzed a database con-
sisting of the technical and perfomlance specificarions of every model
of disk drive ntroduced by every company in the world disk drive
industry for each ofthe years between 1975 and 1994.
2
This database
enabled me to identify the firms thar led in introducing each new
technology; to trace how new technologies were diffused through
rhe industry over time; to see which firms led and which lagged;
and to measure the impact each technological innovation had on
capaciry, speed, and other parameters of disk drive performance. By
carefully reconstructing the history of each technological change in
the industry, the c h n g e ~ that catapuIted entrants to success or that
precipitated the failure of established Ieaders couId be identified.
This study led me te a very different view of technology change
than the work of prior scholars on this question had led me to expect.
Essentially, ir revealed thar neither the pace nor the difficulry of
technologic31 change lay at the root of rhe leading fil1llS' failures.
The technology mudslide hypothesis Y\las wrong.
The manufacturers of most products have established a trajectory
of perfonnance improvement over time.
3
Intel, for example, pushed
the speed of its microprocessors ahead by about 20 percent per year,
from its 8 megahertz (MHz) 8088 processor in 1979 to its 133 MHz
Pentium chip in 1994. Eh Lilly and Company improved the purity
of its insulin from 50,000 impure parts per million (ppm) in 1925
to 10 ppm in 1980, a 14 percent annual rate of improvement. When
a measurable trajectory of improvement has been established, de-
tel1llining whether a new technology is likeJy to improve a product's
perf0l111anCe relative to earlier products is an unambiguous question.
But in other cases, the impact of technological change is quite
different. For instance, is a notebook computer better than a main-
frame? This is an ambiguous question because the notebook computer
established a completely new pelformance trajectory, with a defini-
tion of perfol1llance that differ, substantial1y from the way mainframe
perfonnance is measured. Notebooks, as a consequence, are general]y
sold for very different uses.
This study of technological change over the history of the disk
drive industry revealed two rypes of technology change, each with
HoU' Catt Creat Frms Pail? 9
ver}" differt'nt effects en the industry's leaders. Technologies cf the
first sort sustailzed me industry's rate of improvement in produce
perfonnance (total capaciry and recording density were the two most
COllunon measures) and ranged in difilculty from incremental to
radicaL The industry's dominant firms :uways led in deve10ping and
adopting these tedmologies. By contrasto innovations of the second
sort disnlpted or redefined performance trajeetories-and consistenrly
resulted in che tailure oftne industry's leadng nnm.'
The remainder of this ehapter illustrates the distnction between
sustaining and disruptive technologies by describing prominent eX<lln-
pIes of eaeh and summ<lrzing the role rhese played in che industry's
development. This discussion focuses on differences in how estab-
lshed fimls carne ro lead or lag in developing and adopting ne\v
technologies, conl.pared ",ith entrant fimls. To arrive at these exal11-
pies, each new technology in the lndustry was examined. In anaIyzmg
wruch firms led and lagged at eaeh ofthese points of change, 1 defined
estahlishcd j/1711-' t be those rhat had been established in the industry
prior to che advent of the technology in quescion, practicing tne
prior techllolOg)r. 1 defined entrallt jirr/lS as ,hose chat were new co
(he industry at thar point of technologv change. Hence, a given fiml
\VouJd be considered an entrant at one specific point in the industry's
history, for ex.lmple, al che emergence of che 8-inch drive. Yet the
same firm ""ould be considered an establi,hed firm 'l.vhen technologies
thal emerged subsequent to the fum's entry \vere srudied.
SUSTAINING TECHNOLOGICAL CHANGES
In th!:: history of the disk drive industry, most technology changes
have sustained or reinforced established crajectorie:\ of product pelfor-
manee improvement. Figure .4. which compares che average re-
cording density of drives that employed suecessive generations of
head and disk technologies, maps a11 example of this. The first curve
pIots the density of drives that used conventional particuJare oxide
disk technology and ferrite bead technology; the secand charts rhe
average density of drives thar used new-technology rhin-film ht!ads
JO H'hy GT!!.Jt C<Jl1lpa.lies Can El
Figure 1.4 Impact ofNew Read-Write Head Technologies in
Sustainillg the Trajectory of Improvement in Recording
Density
1,000 ]
:2
c.>
.5
100
1975 1980
Magneto-resistive heads" J ~
r , / ~
Thinfilm heads ',,-
1985
Year
1990 1995
Source: Data are from various issues of Di5k/Trend Report.
and disk:;; the third marks the improvements in density achievable
with the latest head technology, magneto-resistve heads.
5
The way such ne,v technologies as these emerge to surpass the
perfonllance oE the old resembles a series oE mtersecting technology
S-curves.
6
Movement along a given S-curve is generally the result
of incremental improvements withm an cxisting technologic:al ap-
proach, "vbereas jumping onto the next technoJogy curve implies
adopting a radica1ly new technology. In the cases measured in Figure
1.4, incremental advances, such as grinding che felTite heads to fincr,
more precise dimensions and ming smaller and more findy dispersed
oxide particles on che disk's surface, led to the improvements in
densiry from 1 to 20 megabits per square illCh (Mbpsi) between 1976
and 1989. As S-curve theory would pn:dict, che improvement in
recording density obtainable wth ferrite/oxide technolo!,ry began to
level off toward the end ofthe period, suggesting a maturing technol-
ogy. The thin-film head and disk teclmologies' effecr on the industry
HolI' Cal1 Crea! Fi>-l1Is Fa;/.' 11
sustained performance improvement at its historical rateo Thin-film
heads were barely established in the early 19905, when even more
advanced magneto-resistive head technology emerged. The impact
of magneto-resistive technology sustained, or even accelerated, the
rat.e of performance improvement.
Figure 1.5 describes a sustaining technological change of a very
different character: an innovation in product architecture, in which
the 14-inch Winchester drive is substituted for removable disk packs,
which had been the dominant design between 1962 and 1978. Just
as in the thin-film for ferrite/oxide substitution, the impact ofWin-
ches ter technology sustaned the historically established rate of perfor-
mance improvemenr. Similar graphs could be constructed for most
other technoJogical innovations in the industry, such as embedded
servo systems, RLL arrd PRML recording codes, higber RPM mo-
tors, and embedded interfaces. Some of these were straightforward
Figure 1.5 Sustaining lmpact of the Winchester Architecture on the
Recording Density of 14-inch Disk Drives
:c
10
<>
E:
Winchester drives "-
!!:! 5
C\l
:
cr
3 (/)
..
GJ
2 Q.

ii
'O
11)
t:

0.5
'" Removable dlSk pack drives
!

0.3 .
c:
GJ
0.2
Q
..
!!!
c:(
0.1
1965 1970 1975 1980
Year
Source: Data are from various issues of Disk I Trend Report.
12 vl'7,y Creat Companies Can Fal
technology improvements; others were radical departures. But all
had a similar impact on the industry: They helped manufacturers to
sustain the rate of historical performance irnprovement that their
custorners had come to expect.
7
In literally every case of sustaining technology change in che disk
drive industry, established firms led in development and cornmercial-
ization. The emergence of new disk and head technoJogies illustrates
this.
In the 19705, sorne manufacturers sensed that they were reaching
the lmit on the number ofbits of information they could pack onto
oxide dsks. In response, disk drive manufacturers began studying
ways of applying super-thin films of magnecic metal on aluminum
to sustain the hsrorical rate of improvements in recordng density.
The use of tmn-film coatings was then highly developed in che
integrated circuit industry, but its application to magnetic disks sti.ll
presented substantial challenges. Experts estimate that the pioneers of
thin-film disk technology-IDM, Control Data, Digital Equipment,
Storage Technology, and Ampex-each took more than eight years
and spent more than $50 millon in that ettort. Between 1984 and
1986, about two-thirds of the producers active in 1984 introduced
drives \vith thin-film disb. The over.vhelmng majority of these
were established industry incumbents. Only a few entrant firms at-
tempted to use thin-film disks in ther inicial products, and most of
those folded shortly after entry.
The same pattem \Vas apparent Il rhe emergence of thin-film
heads. Manufacturers of ferrite heads saw as early as 1965 the ap-
proaching linut to improvements in this technology; by 1981 many
believed that the limi.ts of precison \VouId soon be reached. Re-
searchers tumed to thin-film technology, produced by sputtering
thin fihns of metal on the recording head and then using photohthog-
raphy to etch much finer electromagnets than couId be attained
with ferrite technology. Again, this proved extraordinari1y difficult.
Burtoughs in 1976, IBM in 1979, and other establshed firms first
successfully incorporated thin-film heads in disk drives. rn the period
bet\Veen 1982 and 1986, during which sorne sxty firms entered the
rigd disk drive industry, only four (all cornmercial failures) attempted
How Can Crear Firm, Fa!l? 13
to do so using thin-film heads in their initial producrs as a so urce of
perfomlance advantage. All other entrant firms-even aggressively
perlonnance-oriented firms such as Maxtor and Conner Perph-
erals-found it preferable to leam ther \Val' usng conventional territe
heads first, before tackling thin-film technology.
As \vas the case with thin-film disks, the ntroduction of tln-
film heads entaikd the sort of sustained nvestrnent thar onIy estab-
lished tirms could handle. IBM and its rivals each spent more than
$100 mllion developng thin-film heads. The pattem ,"vas repeated
n the next-generaton magneto-resstive head technology: The in-
dustry's largest firms-rBM, S eagate , and Quantum-led the race.
The establshed finns were the leading nnovators not just in
developing risky, complex, and expensve component technologies
such as thin-film heads and disks, but in liccrally everJ' otile,. one cf the
stlstaifling iflllovafolls in he hldustry's histar)'. Even in relatively simple
innovations, such as RLL recording codes (which took the ndustry
from double- to triple-densty disks), establshed firms were the su c-
cessful poneers, and entrant D=S ""ere the technoiogy follo\vers.
Thi5 was also tme for those archtectural innovations-for example,
14-inch and 2.5-inch Winchester drives-whose impact \vas to sus-
tain established improvement trajectories. Established firms beat out
the entrants.
Figme 1.6 sUlnmarzes this partem of techllo1ogy leadership
among estz,blished and entrant firnls offering products based on new
sustaining technologies during the years when those technologies
were emergmg. The pattern i5 stunningly consistent. Whether the
technoJogy \Vas radical or incremental, expensi\'e or cheap. software
or hardware, component or architecture, competence-enhancing or
competence-destroying, the pattem was rhe same. When faced with
sustaining technology change that gave exsting customers something
more and better in what they wanted, the leading practitioners of the
prior rcchnology Jed the industry in the developmem and adoption of
the new. Clear1y, the leaders in this industry did not fa] because
they became passive, arrogant, or risk-averse or because they couldn't
keep up with the srunning rate of technological change. 1\1)' technol-
ogy mudslide hypothess \vasn't correcto
14 1'"71y Grcal. Compatlcs Ca/1 Fail
Figure 1.6 Leadership ofEstablisbed Fnns in Sustaining Technologies
'* ~ 30
en
Qj .:! 30
'1:l '"
'1:l en
c '"
c-
:lE :1: 25 :lE O 25
DIE DIE
E=
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~ ~ 20
'g ~ 20
=.5
e; ~ 15 e; : 15
E.r. ES
ii:jlO ii: - 10
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--rI
o '"
... 8.
5
... 1:1.
S
'" 1:1.
"'1:1.
.c ._ .c-
E
'" E '"
'" O"
O
",O"
O
ZW ZW
76 80 84 88 84 85
Vear Vear
'* 2l
!!J. en 35
g''g I
'" '"
'g 'g 30
i ~ 16-1
:lEC)
SS ~ :5 g' 25
~ ~ 2 ~
. 'S
'" 5 20
=:2 - E <>
IL u
& 15
'0<
s--i
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~ ~ 10
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1:
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74 76 78 84 85 86
Vear Vear
CJ Entrant Firms
~ Established Firms
So urce; Data are froro various issues of Disk/Trend Report.
FAILURE IN THE FACE OF DISRUPTIVE
TECHNOLOGICAL CHANGES
86
87 88
Most technological change in the disk drive industry has consisted
of sustaining innovations of the sort described aboye. In contrast,
there have be en only a few of the other son of technological change,
called disruptive technologies. These were the changes that toppled
the industry's leaders.
How Ca11 Crea! FintE Fail? 15
The most important disruptive technologies were rhe architec-
tural innovations that shrunk the size of the drives-from 14-inch
diameter disks to diameters of8, 5.25, and 3.5-inches and then from
2.5 ro 1.8 inches. Table 1.1 llustrates the ways these innovations
were disruptive. Based on 1981 data, it compares the attributes of a
typical 5.25-inch. drive, a new archirecture that had been in the
market for less than ayear, with those of a typieal 8-inch drive,
whieh at that time was the standard drive used by minieomputer
manufaeturers. Along the dimensions of performance important to
established minicomputer manufacturers-capacity, cost per mega-
byte, and access time--the R-inch product was vastly superior. The
5.25-ineh architecture did not address the perceived needs of mini-
computer manufacturers at that rime. On the orher hand, the 5.25-
inch drive had rearmes that appealed to che desktop personal computer
market segment just emerging in the period between 1980 and 1982.
It was smalJ and lightweight, and, priced at around $2,000, it could
be ineorporated into desktop machines economically.
Generall)' disruptive nnovations \Vere teehnologically straightfor-
ward, consisting of off-the-shelf components put together in a prod-
uct architeeture that was often simpler than prior approaches." They
offered less ofwhat customers in established markets wanted and so
eouId rarely be initially employed there. They offered a different
package of attributes valued only in emerging markets remo te from,
and unimportant to, the mairntream.
Table 1.1 A Disruptve Technology Change: The 5.25-inch
Winchester Disk Drive (1981)
Attribute
Capaciry (megabytes)
Pbysical ,"olume (eubc nebes)
\1/ eight (pounds)
Access time (mllliseconds)
Cost per mega byte
Unit cost
S-Inch Drives
(Minicomputer
Market)
60
56
21
30
$511
$300()
5.25-Inch Drives
(Desktop Computer
Market)
10
lS0
6
160
$200
52000
Source: Data are from various issues o Disk I Trend Report.
16 rVhy Great Compal1es Ca/I ral
The trajectory map in Figure 1.7 shows how t i ~ series of simple
but disruptive technologies proved to be the undoing of sorne very
aggressive, astutely managed disk drive companies. Until the md-
1970s, 14-inch drives witil rcmovable packs of disks accounted for
nearly all disk drive sales. The 14-inch Winchester architecture then
emerged to sustain the trajectory of recording density improvement.
Figure 1.7 Intersecting Trajectories of Capacity Dcmanded versus
Capacity Supplied in Rigid Disk Drives
10,000
1,000
iD
~
?:
'u
.,
C.
ni
100
U
...
.,
Q
"E
.,
J:
10
1975 1980 1985 1990
Year
So .. rce: Clayton M. Christensen, The Rigid Disk Drive Industry: A
History ofCommerciaJ and Technological TurbuJence," Business History
Reviell' 67, no. 4 (Winter 1993): 559. Reprinted by pennission.
HOlV Can Crear Firms Fal? 17
Nearly a11 of these drives (removabIe disks and Winchesters) were
sold to mainframe computer manufacturers, and the same companies
hat led the market in disk pack drives led the industry's transition
ro the Winchester technology.
The trajectory map shows that the hard disk capacity provided
in the median priced, typically configured mainframe computer sys-
tem in 1974 waS about 130 MB per computer. This increased at
a 15 percent annual rate over the next Efteen years-a trajectory
representing the disk capacity demanded by the typical users of new
mainframe computeTS. At the same time, the capacity of the average
14-inch drive introduced for sale each year increased at a faster, 22
percent rate, reaching beyond the mainframe marker to the Iarge
scientifJc and supercomputer markets.?
Between 1978 and 1980, several entrant firms-Shugart Associ-
ates, Mi cropolis, Priarn, and Quantum-developed smaller 8-inch
drives with 10, 20, 30, and 40 MB capacity. These drives were of
no interest to mainframe computer manufacrurers, which at that time
were demanding drves with 300 to 400 ME capacity. These 8-inch
entrants therefore sold their disruptive drives nto a new applicaton-
minicomputers.
l
>1 The customers-Wang, DEC, Data General,
Prime, and Hewlett-Packard-did not manufacture mainframes, and
their customers often used software substantally different from that
uSt'd in mainframes. These firms hitherto had been unable to offer
disk drives in their small. desk-side ITnicomputers because 14-inch
models \Vere too big and expensive. Although initially the cost per
megabyte of capacity of8-inch drives was higher than thar of 14-inch
drives, these new customers were vvilling to pay a preITum for
other attributes that were important to them-especiaJly smaller size.
Smallness had little value to maintrarne users.
Once the use of8-inch drives became establshed in ITnicomput-
ers, the hard disk capaciry shipped with the median-priced minicom-
puter grew about 25 percent per year: a trajectory deterrnined by
rhe ways in which minicomputer owners Ieamed to use ther ma-
chines. At the same time, however, the 8-inch drive makers found
that, by aggressively adopting sustaining innovations, they couId in-
crease the capacty of their products at arate of more than 40 percent
18 Wlly Crear COll1pallies Can Fa;!
per year-nearly double the rate of increase demanded by their
original "home" minicomputer market. In consequence, by the mid-
19805, 8-ioch drive makers were able to provide the capacities re-
quired for lower-end mainfranle computers. Unit voJumes had grown
significantly so that the cost per megabyte of 8-inch drives had
declined below that of 14-inch drives, and other advantages became
apparent: For example, the same percentage mechanicaJ vibration in
an 8-inch drive, as opposed to a 14-inch dtive, caused much less
variance in the absolute position of the head over rhe disk. Within
a three-to-four-year period, therefore, 8-inch drives began tO invade
the market above them, substuting far 14-inch drives in the lower-
end mainframe computer market.
As the 8-inch products penetrated the mainframe market, the
establi,hed manufacturers of 14-ineh drives began to fail. Two-thirds
of them never introdueed an 8-ineh model. The one-third that
introduced 8-ineh models did so about two years behind the 8-inch
entrant manufacturers. Ultimately, every 14-ineh drive maker was
driven trom the industry. 11
The 14-ineh drive makers \Vere not toppled by the 8-iIlCh enn'ants
beeause of technology. The 8-inch products generalIy incorporated
standard off-the-shelf eomponents, and when those 14-inch driv!;'
makers that did introduce 8-ineh models got around to doing so,
their products \Vere very performance-competitive in capaeity, areal
densir)'. access time, and plice per megabyte. The 8-inch models
irmoduced by the estabhshed firms in 1981 were nearly identiea1 in
perfom1ance te the average of those introduced that year by the
entrant firms. In addition, the rates ofimprovemenr in key attributes
(measured bet:\veen 1979 and 1983) were stunningly similar between
established and entrant firmS.12
Held Captive by 17/eir Customers
Why \Vere rhe leading drive makers unable to launch 8-inch drives
untiJ it was too late? Clearly, they vv'ere technologieally capable of
producing these drives. Their fuilure resulted from deJay in making
the strategic commitment to enter the emerging market in whieh
How Can Creat Finlls Pal? 19
the 8-lnch drives nitially could he soldo Imerviews wirh marketing
and engneering execuuves close ro rhese companies suggest that the
established 14-inch drive manufe.eruten; ",vere held captive by custom-
e!S. Mam[rame compurer J:1allucmrers did not neec an 8-lnch drive.
In fact. they expliCltly did notwant it: they warlted drives ,<vtn increased
caparit)' at a lower cost per megabyte. The 14-inch drive manufacturers
were listeningand respondingto lheirestablished custo!11ers. And their
customers-'m a way thar was not apparent ce eirher rhe disk drive
manuf.1.crurers Ol' ther cOl11pttter-making custOmers--\vere puling
tht>m akmg a traiectory of 22 perrent capacity faowth in a
platfonn that \\"ould \11timately prove fatal.!.'
Figure 1.7 mar s ::he dispa,.He tr;l.'ftorie, of perfo:r:nance im-
demandee in rhe computer product sei-,
'
ment, that
emerged latero compared to the capacit:-' rhar cnange5 in componenr
technolog\' and rcfint'llll.'m, in system desgtl made a\'ailable wlmin
ea eh succe,sive archtecrure. The sohd li:1es em:mating from ponts
A, D, e, D. and E measure the di:k drive rapacit); pro,'ided with
tl1e median-p,iced computer in ('aeh category, ,,:hile me dotted Enes
fron) the same points measure the ave:-age capac:ity oC all disk drives
introduced fi)r salt' in each architecture. for eaeh year. These transi-
tiom are brietly described be/o\...-.
TI/e Aduc/1t 2( the 5.25-ich Drfc
In 1980, Scap.:ate Technolog\' introduced 5.25 nch drives. Thelr
c:paciti e, of 5 and 10 rvm were (ji no interest to minicorr..puter
manufacturers, wha \Vere demanding drves of 40 ana 60 MD [mm
rheir suppliers. Seagate a;ld other finns that emered witb 5.25-inch
nrivesin thf period 1980 to 1983 (for e:xample, Minscribe, Computer
l\1emories, and Internacional Memories) had lO pioneer new apphca-
tons for tbei:' products an turned primarily to desktop personal
compllter l;lakers. By 19<10. the me ofhard drives in desktop comput-
ers was an obvious applicaton for maf;'11etic recordlng. lt was !lot at
:111 elear in 1980, !-JO\H'H'r. when the marh.et was jusr emerging, rhat
manv people cauld ever afford or use a hanl drive on the desktop.
The eady 5.25-incl: drive maKers found ths application (one rn.:ght
even sal' that they enabled ir) by trial and error, selling drives to
whomever \VouId buy them.
Once the use ofhard drives was established in desktop pes, the
disk capacity srupped with the median-priced machine (that is, the
capacity demanded by the general PC user) increased about 25 per-
cent per year. Again, the teehnology improved at nearly twice the
rate demanded in the new market: The capacity of new 5.25-inch
drives mcreased about 50 percent per year bet\:veen 1980 and 1990.
As in the 8-inch for U-ineh substitution, the first fimls to produce
5.25-inch drives were entrants; on average, established firms lagged
behind entrants by two years. By 1985, oniy half of the firms produc-
ing 8-inch dri ...es had introduced 5.25-inch models. The other half
never did.
Growth in the use of 5.25-inch drives oecurred in two waves.
The first follo. ved creation of a new application for rigid disk drives:
desktop compuring, in wbich product attributes such as physical size,
relarively unimportant in established applications, were high1y valued.
The second wave followed substirution of 5.25-inch disks for larger
drives in established minicomputer and mainframe computer markets,
as the rapidly increasing capacity of 5.25-inch drives intersected the
more slmvly grov;i.ng trajectories of capacity demanded in these
markets. Of the four leading 8-inch drive makers-Shugart Associ-
ates, Micropolis, Priam, and Quantum-only Micropolis survived
to become a significant manufacturer of 5.25-inch drives, and that
was accomplished only V\>ith Herculean managerial effort, as described
in chapter 5.
The Pattem 15 Repeated: 17lc Emergence cfthe 3.5-nch Drive
The 3.5-inch drive '.vas first developed in 1984 by Rodime, a Scottish
entrant. Sales of this architecture were not significant, however, until
Conner Peripherals, a spinoff of 5.25-inch drive makers Seagate and
Miniscribe, started shpping product in 1987. Conner had developed
a small.lightweight drive architecture that was much more rugged than
its 5.25-inch ancestors. lt handled electronically functions that
had previously been managed with mechanical parts, and it used
How Can Creat Firms Fai!? 21
llllcrocode ro replace nmctions that had previously been addressed
c1ecrroIllcally. Nearly aH ofConner's firsr vear re\'enue, of$l i3 mi1-
llOn H carne [ron: Compaq Computer. \\-;cn had aiJea COI1ller'S start-
up \yith a 530 r:,illion nyestmem. The Conncr drives were used pri-
man:y in .lnt."wapplicatlon-ponabk and laprep machines. in addition
to foorpnm" d"skrop modeh-\Yhere customers were willing
t accept lower capacitics ano fgher COst5 per megabyte to ger Jighter
\ycight, greater mggedness, and lower power consumption.
Seagate engineers ",ere llot obli\ious to the ccmillg o the 3.5--
inrh architecmre. lndced, in earl.y 19R5. less than one year afier
Rooime introdllCt'd the t1rst 3.5-inch dri\-e and IWO ye-ars
Conner Peripherah 5tarred shipping irs produce. Seagar,t pe:-sonnel
showed working 3.5-incn protorype drves to cu,romers for evalua-
cion, The inihative tr the ne\\' drives came Tem Seagate's engi-
neering organizatlon. Oppmtio] t0 the program came primaril)'
trom the markt"tng organization and Seagate's executive teanl; they
arguea rnat the market wamed higher capacit\, drives at a lower cos!
per megabyte and rhar 3.5-itH.,h rin:s could ne\er be built at a lower
per rnegabyLC rhan 5.2.3-incn driye,.
Seagate \ mark<>ter., resr",d rhe 3.5-inch Prot0tlT<:,s \vith customers
i:1 rhe desktop cOlllputing Durket ir already sen'ed---manufacturers
like IBM, and \'ake-addd re,e11cIS uf fuJl-sized desktop computer
s)'stems. Not su:-pmi;lgiy, they inilicated lttle merest in the ;;l11aller
dnve. They \Vere ookmg for capacitle, of 40 and 60 for
thelT next-generation machines. while che 3.5-il1ch architeaure
could pro\'ide onl\' 20 MB-;1no ar highcr costs.:
3
In to lukn\"aml fi"om cU"rotners. Seaga!''''s
gTam manager JO\\'ered hi, 3.5 .. i11Ch sales estimares, and the tim1 's
executi"t,s cancded the programo Ther reasoning? The r:J.arkets f()[
5.25-in(h producrs wcre Iarge:-, and the sales generated hy spe;ding
the engineering erron on new S.25-inch produn5 \\'ould create
greater r\"'ven\1es fOl' che compau:' d:an \yould errons targtted at new
3.5-lnch produas.
Ir: retraspen, it aprears that Seagate eXl,clltives read th(' mar-
kct-at Ieast their own market-\'('n' accurately. \Vith esrabiished
applications and produet archirtetures of their o'\vn, such as he
IBM XT and A.T, rhese customers sa',," no yalue in the improved
ruggedness or che reduced size, \,,-eight, and power consumptlOll of
3.5-inch products.
Seagate tinally began shipping 3.5-inch drives n eady 1988-the
samIO' year in \yhich the performance trajectory of 3.5-inch drives
(shown in Figure 1.7) inte-rsected [he traJectory of capacity demanded
in desktop computers. By that time, rhe industry had shipped, cumu-
lati\"ely, neady S750 million in 3.5-inch products. Interestingly, ac-
cording to ndustry obser"ers. as of 1991 almost none oE Seagate's
3 .5-nch products had been sold to manufacturers of portable/laptop/
notebook computers. In other \Yords. Seagate's primary customers
\\"ere still desktop computer manufacturers, and many ofits 3.5-nch
dri,-es \"ere shipped wth frames for mounring them in computers
designed for 5.25-inch drives.
The fear ofcannibalizing sales of existing products is ofren cited as
a reason ,,..hy established finns dela" the introducnon oE ne\\" technol-
ogies. As rhe Seagate-Conner experience illustrates, however, if n e'"
technologies enable new market applicatons to emerge, the inrroduc-
tion of new rechnology may not be inherent1y cannibalistic. Bur when
established finns \"ait until a ne\\" rechnology has become commercially
mature in its ne\v apphcatons and launch their own version of the
rechnology only in response to an attack on their home markets, the
fear of cannibalizarion can become a self-fulfilling prophecy.
Although \\'e haye been looking at Seagate's response to the devel-
opmenr ofthe 3.5-1nch driye architecture. its behaviorwas not atypical;
by 1988, only 35 percent ofthe drive manufacturers thar had established
themselves making 5.25-inch products for ,he desktop PC market had
ntroduced 3.5-inch drives. Similarto earlierproductarchitecture tran-
sitions, the barrier to de\'elopment of a competitiye 3.5-inch product
does nor appear to ha\'e been engineering-based. As in the 14- to 8-
inch transitlon, the nev,;-architecture dnyes introduced by the incum-
bent, established tlrms during rhe transitiorrs from 8 to 5.25 inches and
from 5.25 to 3.5 inches \vere fuliyperformance-competltlve wth those
of entrant dri,es. Rather, the 5.25-inch drive manufacturers seem to
have been nllsled by their customers, notably IBM and its direct com-
petitors and resellers, \"ho themselves seemed as obli .... ious as Seagate
Hot/l Can Creal Firms Fail? 23
to the potent! benetits and pO$sibllites of porcable compucing and the
new disk cirive architecture thar mlghr :-aClut,lre ir.
Prairietd:, CD1IIICr, alld tlu: 2.5-illch Dr!JC
In 1989 ari industry emram in Longrnont, Colorado, Prairietek,
upstaged rhe ndustry b\ annouTlcng a 2.3 .. inch drive, capturing
nearly all S3!l milhon of this r.ascent :narket. But Conner Peripherah
announce its own 2.5-illCh product in cady 1990 alld by the end
of that year had darncd 95 percent of tbe 2.5-illCh drive marker.
Prairietek dedareci bankr1.lptcy in late 1991, by \ICh time eaeh of
the oH.'r .o.S-inc!: drivemakers--Quanmm. Seagate. \Vestem Dif.'"-
tal. and Maxtor-had introduced 2.5- inch drives of rhei: own.
\Vbt had changed? Had rhe incumbem leading finns finaU)'
learned rhe kssons ofhIStTV? Not realk l\lchough Figt:re 1.7 shows
tbe 1.5-inch drive had sgnitlcanclv less capaclty than ,he 3.3-inch
drives, lhe portable computng markers imo whch [he smaller drins
were sold vaIued other attributes: \veigbt, mggedness, 1m\' power
consumption, sITIall physical size. and so on. Along t{ese dimensiom.
the 2.5-inch cirivt: offered impron:-d performance over that of the
3.S-inch product: Ir \vas a slIstaillIgtechnolog,"):. In facr, the computer
makers who bought Conner's 3.5-mch dnve---laptop cOlIlpurer
manufacturen such as Toshba, Zertb. ano Sharp-wcre dw Jeading
makers of noteboOK computers, and these finlls neened tbe sm.iller
2.5-inch drive architecrure .. Hence. Cnner and es competitors in
the 3.5-i:Kl market followed their clI,rorners seamlessly across the
transion to 2.5 inch
In 1 Sl92. however, the 1.8-inch drive emerged, , .... th ; disonctly
disruptve character . .I\.Jtl:1.ough ir5 stor)' \\iJ.! be recounted in detall
la ter, it sufllces to state nen' that by 1995. lt "-'as eiltrant trr:1S (hat
controlled 98 percent of the S]30 mi:lioll 1.8-inch drive markeL
Moreover. rhe la:g:f'st nj(])! :narket or 1.8-mch duves wasn't in
compllting ar aH. lr \Vas in portabk heart monitocng devices!
Figure 1.8 summarizes this pattem 01 entraar hITJ1S' ;eadership in
disr>1ptive tedmology. It shows, .ror examp1e, chat (\\'0 years af::e
the 8-nch drive was introduced, two-rhirds of the nr,s producing
;J.; H Ji)' Grecu Ci'mpm:ic.< Cal! Paji
Figure 1.8 Leadership ofEntrant Finns in Disruptive Technology
Year
83 84
Year
Year
0 4 ~ ~
85 91
D Entrant Firms
D Established Firms
92 93
Year
Source: Data are from various issues of Disk/Trend Report.
ir (tour of six), \vere emranrs . A.nd, t',YO years after the {irst 5.25-
inch drive \Vas imrodtlced, 80 percem of the finns producng these
dsruptive drives \Vere enttants.
SUMMARY
There are several parterns in the hisrory of innovaton in the disk
drive ndustry. The first is that the disruptive innovations were tech-
nological1y straightforward. They general1y packaged known
technologies in a unique archtecture and enabled the use of these
products in appEcarions where magnetc data storage and rettieval
previously had not been technologicaJly or economical1y feasible.
Hou> CaH Crear Pirms Fail? 25
The second is rhat the purpasc of advanccd ct'chnology
de"dopmem III che industry \\'a5 always ro sl/sraill cstablished trajecro-
ries of performance improyernent: ro reaen rhe higher-pertormance,
highcr-marg:tn domn ofrhe upper righr ofthe trajectory map, Many
01" thesc technologies "'er radicalJy ne,\" and dfficult, but rhey \Vere
nor dmupti\'e, The o the leadmg d,k Llrive sllpplirs led
thcm tO\Yard rhe,e achle\'ements, Smtaining technologies. as a result.
did nar precipitare failure,
The thnd patteDl shmys tbar. despite the established fums' techno-
logical prowess in leading sustaining inno\'ations, from the simplest
tO tht' musr radical, che finm tbe led rhe industrv in every insrance
of developing and J.dopting dlSrupriVC techno!ogies w:::re emra!1ts lO
che nousn:y. nOl ir;, incumbent Jeaden,
This book began by posing a puzzle: \Vny ,,'as ir rhat fum5 chat
could be estcemed as aggn'5s\'e. milOvatlve, customer-sensitive orga-
mzatiom (ou::! ignore or attend bebtedly lO rechnologicaJ innovatiollS
with enonnous str:negic impon;ncer In the context of the preceding
analym o1,he d,sk dri\ (' industry. rhis que,,on can be sharpe!1ed con-
slderabl)', Tu::: esrablished fimls \\'ere. in tacto agf;Tessh'e, innovatvc.
and cuswfficr-semti\'e in their approaches LO smtaining innm'ations
oC e,'eryson, Bm the problem establi$hed tlnns sccm unable lO eonfront
i; thar of dOllhlll'o1Td vis10n and mobiliry, in tenns of thr
trajectory map, Fndmg ne\\ applic:mons and markt>ts for these new
product> s{:ems to be a c.lpability thar each of these fimls exlbited
once, upon enrry. and rhen app.trently Jost. Ir ,YaS as ,ftle leadng firms
\Vere heid capti\'e by their cU5tomers, enabling attackmg entram tlmls
ro topple eh!! incumben! indum-y eaeh ame a disrupth'e tt'ch-
nology emerged, l' Why chis happ<"ned, alld is stiU happening, s che
of the ne;.;t charrer,
APPENDIX 1.1: A NOTE ON THE DATA AND METHOD
USED TO GENERATE FIGURE 1.7
The trajectones mappea in Figure 1.7 wen' calculated .!S follows,
Data on rhe eapaci10' pro\"ided \,,'ith computers was obtamed from
16 'Ir}" Grt<lt CiJl/!pcmies Ccm Fa;1
Data Sow'ces, an anuual publication listng the technical specfications
of all computer mode1s availabJe from e\'ery computer manufacturero
For instances in which particular models were ayaJ.!able with ditterent
features and configurations. the manufacturer provided Dala 501/1"ces
wlth a "typical" system configuraron with dehned random access
memory (RAM) capaCl'}', perllmnance specifications of peripheral
equpment (inclurung disk drin:,s).list prices, and year ofintroducrion.
For instances in v,'hich a gi\'en computer model \Yas offered for sale'
O\'er a sequence of \"ears, the hard disk eapacity prO\'ided in the typical
configurarion '}'pcally increased. Dattl SOllr(es used [he caregories
mainframe. mini/m.idrange. desktop personal, portable and laprop,
and notebook. As of 1993. 1.8-nch driYe> were nor being used in
hand-held compurers, so no dara on rhat patemia! market eXlsted.
For Figure 1.7. ter each yea.r and each class of computers, a11
models avaiJable ter sale were ra.nked by price and the hard d,k
capacit\' pro\'ided \virh rhe median-prieed model identified. Thc
best-fit lnes through the resultanr time series \vere plorred as the
solid lines in Figure 1.7 for expository simplificaron ro indicate rhe
trend in t\'pical machines. In realit\', of cou,-se. there is a wide band
around [hese lines. The fTO/lTier of pertornlance---rhe hghest capacity
otlered with the mosr expensive computers-\vas substanti:lily higher
than the t\'pical \'a!ues sho,,'n.
The dorted lines in Figure 1.7 represent the best-fit line through
the un\\"eghted J\"Crage capaci'}' of all disk drives introduced for sale
in each given architecrure fol' each year. This data \Yas rakcl1 rom
DisklTrelld Report. Again, for expository smplitication, only this
average line s shown. There 'was a \nde band ofcapacities introduced
for sale in each ;-ear, so thar the fronner or highesr capaci'}' drive
introduced in each rear was substantially aboye the average shown.
Stated in anather \\"ay, a distnction must be made berween rhe full
range of products available ter purchase and rhose in t\'pical s y s t e m ~
The upper and lowcr bands around the median and ayerage figures
shown in Figure 1.7 are generally para11el ro rhe lmes sho\'m.
Because higher capacity drives were available in the market than
were offered with rhe median-priced systems. the solid-line trajector-
ies in Figure 1.7, as 1 state in the text, represem the capacities
HOll! Cal! Crear Firm5 Fail? 27
"demanded" in eac:h market. In other \vords, the capacity per ma-
chine was nor constraned by technological availability. Rather, 11
represents the selection oC hard disk capacity by compurer users,
giVCll the prevaling cost.
NOTES
1. A more complete lswr\' of the disk drive can be
found in Clayton M. Christensen, "The Rgid Disk Drive
Industry: A History of ComrnerciaJ and Technologcal Tur-
buJence," BliSllCSS Hstory Re1'eu' (67), Wnter. 1993,
531-588. 'lhis history foemes only 011 rhe faanufacrurers of
rigd disk drives or haTo dril'es-products on which data
are stored on rigid metal platters. Companes .:nanufacmring
floppy dl';k drivts (!emovabk diske-ttes o:'i1t:xible mybr coated
with ron oxide 011 which data are stOred) historically \Vere
dfferent nnm from those making hard d1Sk drive;.
2. Much of the da:.. for this analysis carne from Di"kITrend
Report, a highly respectcd mnuallllarket research publicaton,
augmemed v:ith more detaileJ pracillct-speciiication shects
o!Jtained fmm the disk drive manufacturer, rhem,elves. I am
gratl'flll to lne editors and m.ff ar Dsk:'Trt:nd. lne., for their
panem and generaus assistance in this pro.iect.
3. The COIlcept of trajt:ctories of technological progress was ex-
amned by Gioyanri Dosi in "Tedmologicai P;lradlgns ana
T echnologcal T rajectories," RC.'earch Polie}' (11), 1982.
H7-162,
4. Thc \vay:,:n which tlle findings ofthis ,tud)' differ from those
of some earlier scholars of technolof,'Y change whle building
tlpon those of others are discussed in greater detal in chapter
2.
S. Th(' nm technology for makiIlg heads bui]t m elcc-rromagnet
by wrapping a fine thread of copper \A'ire .l.wllnd a core of
iron oxide (erritc); hence rhe termJm!e head. Incremental
irnprovements to LJ"is approach involved leaming to grh'1d the
28 rv/l' Crear Campa/lies Cml Fai]
ferrite to finer and finer dimensions, using better lapping
techniques. and strengrhening the ferrite by doping it wirh
barium. Th/l-Jilll1 heads \wre made photolithographcally,
using rechnology similar to rhat used in making ntegrated
eircuits on silieon wafers to eteh the electromagnet on tbe
sudaee of rhe head. Tbis was difficult beeause it itlvolved
mueh rhicker layers of material rhan \Vere eommon in le
manufacturing. The third technology, adopted starting in the
rnid-1990s. was called l1Iil,illeto-resistl'E heads. These \Vere also
made ,th thin-film photolithography, bur used rhe principIe
at changes in rhe magnetic flux fidd on the disk surfaee
changed rhe eleerrieal reslStivity of the circuitry in the head.
By measunng ehanges in resstivity rather than ehanges in the
drecnon ofcurrent flow, magneto-resistive heads Viere muen
more sensitive, and henee pennitted denser data reeording,
than prior technology. In the evolution of disk technology.
the earliest disks were made by coatng fine needle-shaped
particles of iron oxide--literally rus e-o ver rhe surface of a
flat, polished aluminum platter. Hence, these disks were called
oxide dsks. Incremental improvemems ro this technology in-
\'oh'ed making finer and finer iron oxide particles, and dispers-
mg them more unifonnJy, ",ith fewer uncoated vods on rhe
aluminum platter's surta.ce. This \Vas supplanted by a sput-
rering technology, also bOITowed from semiconductor pro-
cessing. thar coated dle aluminum pIarter \Virh a thin liIm of
metal a fe-w angstrorns thiek. The thinness of this layer; rs
cominuous, rarher than particulate nature; and rhe process's
flexibiJity in deposting magnetic materials \Vith higher coer-
cvity. enabled denser recording Oll chin-fi1n1 disks than was
t!::asible on oxide disks.
6. Richard J. Foster. The Attacker's Advantage (New
York: Summt Books, 1986).
7. The examples of technology change presented in Figures 1.1
and 1.2 introduce so me ambiguity ro the unqualified tenn
discotltimlty, as used by Giovanm Dosi (see "Technological
Paradigms and Technological Trajectories," Rcsearch Polq
Ho", Can Creat Firm.' Fail? 29
[11] 1982), Michael L. Tushman and Phili.p Anderson (see
"1 cchnological D.!scontnuities and Organizltonal Environ-
ments. ,. Admillistrutive SdCI1(e Q:Wl't('l'y [31], 1(86). and others.
TIl' innovatlons in head md disk tech.nology describt'd in
Fgme 1.4 represent ]liJSlti!'e disco:1tinuities 111 an estabbhed
technologcal trajectory, while t,he tech-
nologics charted in Figure 1.7 represen uq;arllf rusconnu-
itie;. As will be showl1 helo\\', es:ablished flnm secmcd quite
capable o' leadng the indusrry over positive dscontillUlties,
generally 105t their indusrry cad when faced with negative
lscon::nuities.
8, Thl<; tendency consistently appean across a range ofindustries.
Richard S. RosenblooD1 and Clanon M. (in
'TechnologicaJ Organizational Capabilities.
and Strategic Commitments," IlIduJ'tria ,md Corporate Chang;
[3], 1994, 655-(85) a much broader ser ofindusrries in
which leading firms have been toppled by technologically
straightforward disrupti ve innovaw om rhan $ covered in this
book.
9, A sl:mmary oftbe da:.). and procedures used to generate Figure
1. 7 is inciuded in Appendix 1.1,
n. Thc minlcomputer n:arket was not ne\'.' in 1978, but it '-vas
a ncw apphcation tor \Vinchester-techuology disk drves.
J 1, This s\atemem appEes OJ'l.,iy to mdependem drive makers com-
peting in (he OEM rnarket. So:ne of the vercically
computer makers, such as JBM, have survived across these
generatloll'i with che benefit of a captive internal markel. Evcn
mM, bo\\cver. adciressed rht> sequence 0:- difIerent emerging
l1larkets j()r disk drives by crearing amonomous "stan-up"
dn"e o:-ganizations ro address ea eh one, It> San Jose
organizaro:1 focused 011 high- end (primarily rnainfmme) ap-
plications, A separate div1son in Rochc',rer, MN, focusen
on md-range comp1.1ters ;)nd \vorkstaoo!1S. rRM created a
different organization in Fujisawa, ]apa..'1, to prodllce drives
tor che Jesktop personal computer market,
11, T111s result is very ditTerent from thar obse:rved by Rebecca
M. Henderson (see TIle Failure ~ Established Firms in tlle Face
oI Technological Chal1ge: A StHdy of [he Semiconductor Photaltho-
graphic Alignmellt lndustry. russertation, Harvard University.
1988). who found the ne"v-architecture aligners produced by
the established manufacturers to be inferior in performance
to those produced by entranr fimIs. One possible reason for
,hese differem results is thal the successful entrants in the
photolithographic aligner industry studied by Henderson
brought to the ne'N product a well-developed body of techno-
logcal kno\yledge and eJ.-perience developed and refined in
orher markets. In the case studied here, none of the entrants
brought such well-deyeloped knowledge "vith thern. Most,
in fact, were de novo start-ups composed of managers and
engneers ,,,ho had defecred from established drive manufac-
turing firms.
13. This fillding is similar to the phenomenon observed by Joseph
L Bower, \,-,ho saw that explicit customer demands have
tremendous power as a source of impetus in the resource
allocation process: "When the discrepanc)' (the problem to
be solved by a proposed investment) \Yas defined in ternlS of
cost and quality, the projects languished. In all four cases, the
definition process moved toward completion when capacty
to meet sales "yas perceived to be nadequate .... [n ,hort,
pressure [rom the market reduces both the probability and
the COS! ofbeing i.vrong." Alrhough Bower specifically refers
to manufacturing capacity, the same fundamental phenome-
non-the power ofthe known needs ofknown customers in
marshaling and drecting the nvestments of a finn-affects
response to dsruptive technology. SeeJoseph L Bower, Han-
agi'g he Resollrce Aflocatan PfDcess (Homewood, IL: Richard
D. Irwn, 1970) 254.
14. In booking $113 million in revenues, Conner Peripherals set
a record for bookng mOre revenues in its first year of operation
than any manufacturing company in United States history.
15. This finding is consistent with what Robert Burgehnan has
observed. He noted that one of the greatest difficulties en-
How Can Crea! Fnns Fail? 31
COtl:ltered by co;porarc entrcFene:':TS beeJ: finding the
nghr "!wta test $ltes" \Yhere produns cOllld be nleractivdy
and rd:ined with Cl'SLOmers. (;,:neJJ1r, a ne'.\" \'cn-
ture's eutrc to rh" \,;), pnn-ceci by the saksp<"r.,on
represemag the tlm's product lim'" Tlus helped
rh" tir!!! cie\'elop ne\\" products fr es:abbh"d but
n,n to ldemii}' new applicarions to!' new l<:chno;ogy. See
Robc:rl A. Burgelman :md Leollard 5ay]es, lllsidr Corpor<ltr
11l110Filn,11l (Nc'w York: The' free Pn':;s. 1986) 76-80.
}6, 1 bdiev(' t!us ;nJckmg Grms bve a:1 adv<H1tagc
in disnlptive innovJtiQrls bU( no: in ones-darHies,
but is nOI in conrllcr \Vah, remer's asse:-riom abom [he attack-
er' s ady.mtagl', The nHto:-:c.al exa;nplcs r oster mc, W mbstm-
tatt> his rhrory gencralk sC'cm ro na\'c hcc!1 disruprive
mmn-arior:s Ser Richard J, lWh1l'allOl1: 'TIli: /lullikcr's
,'l<i".llIuge (1'>;n' Yo,k: Sumrmt Books, 1986),