Managing Innovations And Dominant Design: A Case Study On Sony

Significance of Dominant Design

Question:

How the organizations are managing innovations in this competitive world to satisfy their potential customers and also sustain them?

The purpose of this research is to understand how the organizations are managing innovations in this competitive world to satisfy their potential customers and also sustain them. This research would focus on the significance of dominant design and how the Sony has succeeded in its dominant design. It would also determine the factors that have been helping Sony to succeed in this competitive world through their dominant design for movie producers, retailers and customers (Cherkasky, 2004). Like other organizations, Sony also faced a competitive dynamic in the market of DVD players or the disk market. Sony was quite aware of the emergence of video standards thus to support the rising demand it started focusing on the key production film studios and also video retailers. The success of Sony was totally dependent on the ecosystem partners. Sony clearly understood the fact that Blu-Ray discs and HD DVDs are not compatible to each other and in this helped Sony to meet the demand for high definition video content (globalens.com, 2009). Further, Sony mainly focused on the advantages of Blu-Ray and started giving this innovation in its PlayStation 3 system and sold PS3’ at the cost of $200 per unit to capture the market. This shows that factors, distinct features for capturing the niche market, developing their own installed bases, environmental factors that govern the ability of Sony for capturing the market also helped to innovate such strategies and also persistence support for enhancing the dominant design chances has supported Sony to develop dominant design (Vries, Ruijter and Argam, 2009).

A dominant design is not necessarily a technological factor or particularly meets the needs of the customers. The dominant design process is thus observed as a black box process that includes the interaction of both the technological and non-technological factors. According to Sahal (1985), Abernathy (1978) and Utterback and Abernathy (1975), the dominant design can be defined as a single architecture that would help to acquire the dominance in the product market while Christensen broadly defines dominant design as the concept of defining the product components and also interaction between each products. Between the years, 2003 to 2008, both Sony and Toshiba had faced war against high stakes for having control over the video format for the next generation (Argyres, Bigelow and Nickerson, 2011). The technology of Sony called the Blue-Ray had been supported by the Hitachi, Matsushita and Philips while the technology of Toshiba named HD-DVD had been supported by DVD forum making it as official successor. Movie producers, retailers and consumers all grumbled at the war taking place between Blu-Ray and HD-DVD. Thus, it is very important to analyze the factors that influence the consumers, retailers and movie-producers with regards to HD-DVD and Blu-Rays. All the three parties in this case have different motives to choose either HD-DVD or Blu-Rays (Kiss, 2008). According to the dominant design of Abernathy-Utterback Model, the dominant design development passes through three different phases, first is the fluid phase, transition phase and specific phases. In fluid phase an organization can use two different strategies one is the stabling new product by outmaneuvering the competitors in the market as dominant design or directly taking control over the assets that are complementary and making it as a dominant design. Then, the transition phase that organizations can utilize various strategies that help to consolidate positioning of the product and also start increasing the process innovation and also production capacity. Lastly, the specific phase is the phase, where the organization is quite clear with the market segments to be targeted for dominant design. Here they focus on manufacturing by using high skilled laborers and also specialized equipment (AKIIKE, 2013). However, in order to carry out the process effectively right from technological impact on the processes and products of the market to the strategic decision of the organization, there are various factors like stakeholder factors (regulator, previous and current installed base), mechanism (increasing return through information, network externalities), design features (flexibility, technological superiority and compatibility) that has to be taken care while implementing the dominant design (Van de Kaa et al. 2007). Further, according to the model of Klepper, the same different pattern of density, exit and entry should be determined by the organization to get high returns to scale. As per this model, the early entrants receive high insuperable cost advantages compared to later entrants in the industry due to the process of cost-reduction and high returns on investment in the industry. Therefore, as the organization grows, the cost gap between the later entrants and the early entrants will also grow larger, making the later entrants to exit.

Sony’s success in Dominant Design

Therefore, based on the above theory, the factors influencing the consumers, retailers and the movie producers are discussed below:

Consumers – In order to support either the HD-DVD or the Blu-Ray depends on the technical differences, installed base size, complementary goods, brand loyalty and also movie preferences. The customers segment can be divided in two types one is the early adopter and another is the majority. The early adopters are those groups who show interest towards the technology and focus on doing research to know about the products. The consumers also focus on the complementary goods which mean the number of movies that one of the standards releases (Gallagher, 2007). Consumers who are movie lovers would prefer the standard that would release the highest number of movies. Those who are loyal towards Sony would buy Blu-Ray and those who are loyal towards Toshiba who prefer the brand Toshiba. However, the majority group might base their decision by focusing on the size of the installed base and also the complementary goods. When Sony reached these formats, this became the dominant design for Sony. To promote this formats, Sony incorporated the Blu-Ray device in their Playstation 3. In 2006, Sony sold around 10.5million Blu-Ray machines; however, Toshiba sold only 1million HD DVD machines. Further, consumers also focus on brand (KAGEYAMA, 2008).

• Retailers- When Toshiba also started offering HD-DVD as an optional drive for Xbox 360 of Microsoft; Time Warner announced that the standards of Blu Rays will now be defecting. However, the retailers like Netfix, Walmart and Best Buy announced that they would exclusively keep the stock of Bly-Rays DVDs which became devastating for Toshiba. The factors that might have influenced their decision could be to avoid the again a new technological war, that they faced with Betamax and JVC’s VHS video standards (Gardner, Beckstoffer and Apostolatos, 2012). Further, from the previous war they got stuck with some unwanted inventory. Thus, this time, they wanted to avoid the inventory issue, so they wanted to pick up a winner in the market. They feared the costly and lengthy battle, so they wanted to come up with the players that would be well-suited with both the standards.
• Movie Producers- Through, Blu-Ray standards, Sony persuaded the big film studios. 20th Century Fox and Walt-Disney joined Sony Pictures for supporting Blu-Ray. Further, Blockbuster also decided to go with Blu-Ray. The reason behind such decisions can be that they wanted to follow with the decisions taken by the retailers and the consumers as they wanted the retailers to sell the Blu-Ray DVDs and also wanted the consumers to accept the movies (News.bbc.co.uk, 2008). Further, the unique features of Sony Blu-Rays compared to Toshiba HD-DVD have some great benefits for the film producers. Sony offered 50GB storage capacity in double layer while Toshiba offered only 30GB max. Further, the maximum Bitrate for raw data provided by Sony was 53.95Mbit/s while Toshiba provided 36.55Mbit/s. Similarly, maximum Bitrate for both Audio and Video was 48Mbit/s and 30.24 Mbit/s provided by Sony and Toshiba respectively. The timing for SD Video Playback with MPEG2 at 5Mbits/s was 22.2hours for Sony Blu-Ray and 13.3hours for Toshiba HD-DVD (Diffen.com, n.d.). Thus, in all way Sony had provided better features to the film studios.

Dyesol had invented an innovative product which was a thin-film, low cost solar cell that could help to produce electricity from sunlight. Their main idea was to generate electricity similar the way plants do through photosynthesis, then that could be made into sturdy panel which can be included in building materials. However, they lacked in financial capital for inventing such an innovative product. So, they decided to enter into collaboration with multi-agencies like Tata Steel and Pilkington. Tata Steel was the 5^th largest maker of steel with 26million USD revenue in the year 2011. It was the subsidiary of TATA Group. The reason behind the partnership with Tata Group was that it would help Dyesol to have access to the capital and also its manufacturing expertise. Through this partnership, Dyesol thought that it would also help them to raise DSC technology awareness and also give the opportunity of promoting their technology across various different international markets.

Similarly, they also decided to form collaboration with Pilkington, which was a multinational manufacturer of glass having, 373 million USD revenue in the year 2011.  It mainly manufactured high quality flat glass made up of floating molten glass over molten tin. This partnership helped Dyesol to use the DSC coating on the architectural glasses for developing products made up of sheet glasses. Then, they can market this product to the customers who are interested in consuming the solar energy.

In this way, Dyesol decided to carry out various positive connotations that would help their customers to embrace interests, purposes, aspirations and investments. If conceptually demonstrated, there are three different forms of partnerships one is implementing partnership that mainly focused on the beneficial and pragmatic projects, next is the coordinating partnership that mainly emphasized on implementing better policy and management based on priorities that was already agreed and lastly facilitating partnership that helps to manage strategic issues related to policies and also long-standing issues. Through, this concept, it is clear that Dyesol emphasized on implementing partnership with Tata Steel and Pilkington (Hunter and Perkins, 2014). However, collaboration with external partners points to various advantages and disadvantages.

Factors influencing Consumers, Retailers and Movie Producers

This partnership based approach of Dyesol with Tata Steel and Pilkington would help the organization to deal with the labor and the social market exclusion in various ways like (Pride, Hughes and Kapoor, 2014):

• Responsive and Flexible policy solutions
• As Dyesol, has planned to innovate a new device, there is need of new employees with the knowledge of latest technology or service providers who can solve the problems. This process incurs cost. However, Dyesol does not have enough capital to even launch that product. Thus, partnership with TataSteel and Pilkington would help to tackle such situation as they are already best manufacturing organizations with large number of expertise who can solve their issues.
• Facilitating evaluation and innovation
• Partnership with Tata Steel and Pilkington increases the scope of Dyesol to test innovative and new approaches that would help them to overcome the difficult situation. This partnership approach produces a greater dynamism by sharing risks, practice, expertise and ideas. This allows Dyesol to test the approaches of both partners and also withdraw in difficult situations. This approach actually encourages promoting new innovations and experimentation.
• Sharing resources, knowledge and expertise
• This partnership approach helps Dyesol in defining and sharing the expertise, knowledge and skills that would increase the efficiency, quality and appropriateness. By engaging with the external partners like Tata Steel and Pilkington can help the organization to increase quality, diversity and reach through their expertise.
• Development of Coherent Service
• Working with external partners will make sure that the policy initiatives are aligned with the objectives of the organization. The integration of proper policies along with the external partners helps to ensure that demand side and supply side of the labor market and also try to compliment with each other.
• Capacity Building
• Partnering with the external partners, can help Dyesol to develop good community capacity and also engender the sense of ownership of community. This process offers new opportunities and also helps to meet the concerns. Further, this process also helps to have access to stable and long-term funding.

Disadvantages (Pride, Hughes and Kapoor, 2013):

• Conflict over objectives and goals
• If the external partners are not clear about the idea behind the innovation of Dyesol, then it might cause failure in partnership due to inability to coordinate and also misunderstanding of the objectives. At the operational level, it is quite difficult to gain commitment and also engage the external partners due to some localized problems, inflexibilities and organizational barriers. For instance, in understanding the goals of Dyesol, there is need of both time and effort that both the organizations might not be able to provide due to their own objectives and goals.
• Impact upon other services
• Partnership approach can be observed as an alternative for re-aligning the key services that would help to deal with specific issues. Due to integration and scale of mainstream services, there is a high impact on the long-term services. Partnership can draw resources from typical services or confuse user’s mind for reducing the effectiveness of the organization. For instance, the chemical group of Tata learns to reserve the engineers of Dyesol which can later on become a strong competitor.

Conclusion

In conclusion, this report focuses on how the organization Toshiba, Sony and Dyesol manages innovations, what are the challenges they face while implementing the innovations through two different case studies.

In the war between the two formats, Blu-Ray and HD-DVD, Sony was ultimately the winner. The Blu-Ray format had various advanatgaes over HD DVD due to its superior technological features. Thus, the key industry players like Dell Computer, 20^th Century Fox, Disney etc. Sony was quite aware of the issue that happened in the war between Betamax and VHS, thus, they did not wanted to repeat the same history, so Sony evaluated the preferences of its stakeholders and had incorporated the preferences in Blu-Ray formats. The unique features provided by Blu-Ray had helped Sony to capture the market. There are various factors that influence the decision of consumers, retailers and movie producers. The factors that influence the decision of consumers are the technical differences, installed base size, complementary goods, brand loyalty and also movie preferences, for retailers, avoidance of inventory issues and also to avoid the standard wars and lastly, the factors influencing the movie producers are unique features and also decisions taken by the consumers and retailers.

Similarly, from the case of Dyesol it is quite clear that partnership approach would help the Dyesol to meet the objective clearly. However, to reduce the affect of the disadvantages of this approach it is to be noted that the collaboration with the external partners should be in proper place. This would help to meet the objectives of the Dyesol through collaborative relationship. Through selective alternative choices with the partners, Dyesol need to establish a proper monitoring system that would help them to monitor the actions of their partners and also make an evaluation system which would give the opportunity to manage and evaluate the changes and progress. Further, the external partners also need to make sure that they have new competencies and technological advances that would help Dyesol to meet the objective of innovating thin-film, low cost solar cell and also make a good strategic fit and also resource fit.

References

AKIIKE, A. (2013). Where is Abernathy and Utterback Model?. Annals of Business Administrative Science, 12(5), pp.225-236.

Argyres, N., Bigelow, L. and Nickerson, J. (2011). Dominant Design, Conpositio Desiderata, and The Follower’s Dilemma. [online] insead.edu. Available at: https://www.insead.edu/facultyresearch/areas/entrepreneurship/documents/ArgyresPaper.pdf [Accessed 10 Feb. 2015].

Cherkasky, T. (2004). Design Style: Changing Dominant Design Practice. Design Issues, 20(3), pp.25-39.

de Vries, H., de Ruijter, J. and Argam, N. (2011). Dominant design or multiple designs: the flash memory card case. Technology Analysis & Strategic Management, 23(3), pp.249-262.

Diffen.com, (n.d.). Blu-Ray vs HD DVD – Difference and Comparison | Diffen. [online] Available at: https://www.diffen.com/difference/Blu-ray_vs_HD_DVD [Accessed 10 Feb. 2015].

Gallagher, S. (2007). The Complementary Role of Dominant Designs and Industry Standards. IEEE Transactions on Engineering Management, 54(2), pp.371-379.

Gardner, J., Beckstoffer, J. and Apostolatos, A. (2012). Blu-ray vs. HD DVD The Battle for the High Definition Living Room. [online] faculty.tuck.dartmouth.edu. Available at: https://faculty.tuck.dartmouth.edu/images/uploads/faculty/ron-adner/EIS_Ecosystem_Paper_Apostolatos_Gardner_Beckstoffer.pdf [Accessed 10 Feb. 2015].

globalens.com, (2009). Blu-ray versus HD DVD. [online] Available at: https://globalens.com/DocFiles/PDF/cases/Preview/GL1428594P.pdf [Accessed 10 Feb. 2015].

Hunter, D. and Perkins, N. (2014). Partnership working in public health. Bristol: Policy Press.

KAGEYAMA, Y. (2008). Sony’s Blu-ray poised to win DVD standard battle. [online] thestar.com. Available at: https://www.thestar.com/business/2008/02/18/sonys_bluray_poised_to_win_dvd_standard_battle.html [Accessed 10 Feb. 2015].

Kiss, J. (2008). Sony’s Blu-Ray wins HD DVD battle. [online] the Guardian. Available at: https://www.theguardian.com/media/2008/feb/19/digitalmedia.sony [Accessed 10 Feb. 2015].

News.bbc.co.uk, (2008). BBC NEWS | Business | How the PS3 led Blu-ray’s triumph. [online] Available at: https://news.bbc.co.uk/2/hi/business/7252506.stm [Accessed 10 Feb. 2015].

Pride, W., Hughes, R. and Kapoor, J. (2013). Foundations of business. Mason, OH: South-Western/Cengage Learning.

Pride, W., Hughes, R. and Kapoor, J. (2014). Business. 11th ed. OH: Cengage Learning.

Van de Kaa, Geerten, Henk J. de Vries, Eric van Heck, and Jan van den Ende. The emergence of standards: a Metaanalysis. In: Proceedings of the 40th Hawaii International Conference on system sciences. Piscataway, NJ: IEEE.