{"id":16730,"date":"2020-11-29T10:14:58","date_gmt":"2020-11-29T14:14:58","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=16730"},"modified":"2020-11-29T10:14:59","modified_gmt":"2020-11-29T14:14:59","slug":"value-network-examples","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/value-network-examples\/","title":{"rendered":"Value Network Examples: Seagate Case Study"},"content":{"rendered":"\n

What are value network examples? How do value networks<\/a> fit into the context of the Seagate case study?<\/p>\n\n\n\n

The Seagate case study is about the company’s choices in addressing disruptive disk drives. Looking at value network examples, Seagate technology developed a response.<\/p>\n\n\n\n

Read on to understand the value network examples in the Seagate case study.<\/p>\n\n\n\n\n\n\n\n

Seagate Case Study and Value Network Examples<\/h2>\n\n\n\n

Let\u2019s look at how the 5.25-inch drive innovator Seagate\u2019s value network examples influenced the company\u2019s decision-making<\/a> as it confronted the emergence of disruptive 3.5-inch disk drives. The development and spread of the disruptive technology breaks down into six steps: <\/p>\n\n\n\n

Step 1: Established Firms Develop the Technology<\/strong><\/h4>\n\n\n\n

Established companies often develop disruptive technologies first<\/strong>\u2014though the projects are typically initiated by engineers, not company leaders\u2014and entrants are simply at the forefront of bringing the technology to market.<\/strong> <\/p>\n\n\n\n

Example: Seagate was actually among the first firms in the industry to develop 3.5-inch drives, although it wasn\u2019t one of the first to market the drives. Seagate\u2019s engineers had made dozens of prototypes of the 3.5-inch drives by the time company managers finally approved the project. When they got approval, the engineers showed their prototypes to the firm\u2019s marketing team. These prototypes included value network examples.<\/p>\n\n\n\n

Step 2: Firms Gauge Customer Interest<\/strong><\/h4>\n\n\n\n

When established firms consider developing a disruptive product, they gauge the existing market\u2019s interest in the new technology. By definition, disruptions aren\u2019t attractive to established customers, and the customers\u2019 negative response typically dissuades companies from proceeding.<\/strong> <\/p>\n\n\n\n

In some cases, executives allow disruptive projects<\/a> to continue past this stage\u2014but a lack of conviction about the product\u2019s potential undercuts the commitment to the project. As a result, in day-to-day situations, time and resources are diverted to other projects. <\/p>\n\n\n\n

Example: Seagate\u2019s marketers showed the drives to customers, who weren\u2019t interested in them because the low-capacity drives didn\u2019t meet their needs. Based on customers\u2019 feedback, the marketing team created dreary sales forecasts, and company leaders killed the project.<\/strong><\/p>\n\n\n\n

Step 3: Established Firms Double-Down on Sustaining Innovations<\/strong><\/h4>\n\n\n\n

Based on customer input, established firms\u2019 marketing teams not only discourage executives from pursuing disruptive technologies, but they also push for increased effort on <\/strong>sustaining <\/em><\/strong>technology to improve existing products.<\/strong> <\/p>\n\n\n\n

Example: Seagate compared the market forecasts for 5.25-inch and 3.5-inch drives. The 5.25-inch models with 60-100 MB capacities were projected to bring in 35-40 percent gross profit margins. On the other hand, the 3.5-inch drives had an unknown profit projection\u2014plus, the company\u2019s existing 20 MB-capacity drives brought merely 25-30 percent gross margins. Using these comparisons, Seagate upped production of new-and-improved 5.25-inch models.<\/p>\n\n\n\n

Step 4: Startups Form and Find Customers<\/strong><\/h4>\n\n\n\n

After leadership at established firms turn away from disruptive projects, frustrated engineers often join entrant firms in pursuing the new technology. The startups face the same struggle as established firms in using the disruptive technology to attract customers<\/a> in the existing market\u2014but, unlike established firms, the entrants have no other products to fall back on, so they\u2019re forced to find a market.<\/strong> Through trial and error, the startups eventually find the emerging markets for their innovations. <\/p>\n\n\n\n

Example: Unhappy with managers\u2019 strategies, employees from Seagate and Miniscribe\u2014the two biggest 5.25-inch drive producers\u2014left the established firms to found Conner Peripherals, which ultimately led the industry in 3.5-inch drives. Conner knew that desktop computer makers wouldn\u2019t buy the 3.5-inch drives, so it hit upon the laptop market. The outlook for the laptop market was unclear, but the company had no choice but to try it. <\/p>\n\n\n\n

Step 5: Disruptive Products Invade the Established Market<\/strong><\/h4>\n\n\n\n

The disruptive technology\u2019s performance improvement progresses up the S-curve until it reaches a level of sophistication that appeals to the customers that previously rejected it.<\/strong> In addition to dominating in the emerging market, the new technology then invades the old technology\u2019s market. <\/p>\n\n\n\n

Example: The capacity improvements for the 3.5-inch drives outpaced what the laptop market needed, and the small drive soon satisfied desktop makers\u2019 needs. With the capacity increase, the 3.5-inch drive\u2019s small size, lower price, and reliability made it more<\/em> attractive to personal computer makers than the 5.25-inch drives. <\/p>\n\n\n\n

Step 6: Established Firms Try to Catch Up<\/strong><\/h4>\n\n\n\n

Once the startups begin invading the old technology\u2019s market, established firms make an effort to defend their territory and revive the projects they\u2019d killed <\/strong>in Step 3. However, the established firms discover that the entrants have a competitive advantage<\/a>. <\/p>\n\n\n\n

Since the entrants developed their disruptive products<\/a> in a lower value network (the emerging market), they created cost structures that made the product profitable at lower gross margins. The entrants bring their lower cost structures to the established market, which allows them to offer lower prices than the established firms, whose organizations are built around higher cost structures. <\/p>\n\n\n\n

Example: When Conner Peripherals began selling its 3.5-inch drives to desktop computer makers, Seagate Technology dusted off its 3.5-inch prototypes. Since Seagate had waited until the disruptive 3.5-inch drives invaded the desktop industry before producing its own models, the company simply sold the smaller drives to its existing customers\u2014cannibalizing its own 5.25-inch sales. Seagate Technology never expanded into the laptop market. This was a poor utilization and analysis of their value network examples.<\/p>\n\n\n\n

Outcome of Flash Memory Innovation<\/strong><\/h4>\n\n\n\n

The value network examples best predicted established companies\u2019 trajectories in response to flash memory. <\/p>\n\n\n\n

Disk drive makers hit a limit on how much they could lower the production cost per drive. Since low-capacity disk drives had the same cost floor as high-capacity drives, disk drive makers focused on producing high-capacity drives <\/strong>(around a gigabyte or more), which better served its customers. <\/p>\n\n\n\n

This left an opening for flash memory cards to fill the void in the emerging 10-40 megabyte market. Industry experts predicted that a 40 MB flash card and 40 MB disk drive would be around the same price by the time the book was published in 1997. <\/p>\n\n\n\n

(Shortform note: Flash memory eventually improved enough to invade an established market and replace hard disks in laptops. Flash-based solid-state drives (SSDs) are now in top-performing laptops, including the MacBook Pro and Microsoft Surface.<\/p>\n\n\n\n

Although the Seagate case study ends with the company withdrawing its flash products from the market, the company made a wise decision in retaining a stake in SunDisk\u2014in fact, it\u2019s a strategy we\u2019ll talk more about in Part 2. SunDisk was eventually renamed SanDisk, and the company is now one of the top eight vendors in the memory card market worldwide.)<\/p>\n","protected":false},"excerpt":{"rendered":"

What are value network examples? How do value networks fit into the context of the Seagate case study? The Seagate case study is about the company’s choices in addressing disruptive disk drives. Looking at value network examples, Seagate technology developed a response. Read on to understand the value network examples in the Seagate case study.<\/p>\n","protected":false},"author":6,"featured_media":11435,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[45,31],"tags":[141],"class_list":["post-16730","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-money","tag-the-innovators-dilemma","","tg-column-two"],"yoast_head":"\nValue Network Examples: Seagate Case Study - Shortform Books<\/title>\n<meta name=\"description\" content=\"What value network examples show their importance? 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