October 12th | 11:30 – 13:00 | Delta Room | Quelhas 6 Building
Technological Change: A Burden or a Chance
IST – Technical University of Lisbon
The photography industry underwent a disruptive change in technology during the 1990s when the traditional film was replaced by digital photography (see e.g. The Economist January 14th 2012). In particular Kodak was largely affected : by 1976 Kodak accounted for 90% of film and 85% of camera sales in America.
Hence it was a near-monopoly in America. Kodaks revenues were nearly 16 billion in 1996 but the prediction is that it will decrease to 6.2 billion in 2011.
Kodak tried to get (squeeze) as much money out of the film business as possible and it prepared for the switch to digital film. The result was that Kodak did eventually build a profitable business out of digital cameras but it lasted only a few years before camera phones overtook it.
According to Mr Komori, the former CEO of Fujifilm of 2000-2003, Kodak aimed to be a digital company, but that is a small business and not enough to support a big company. For Kodak it was like seeing a tsunami coming and theres nothing you can do about it, according to Mr. Christensen in The Economist (January 14th 2012).
This paper focuses on industries that have to deal with technological change. The above example showed that this can be a burden. However there are enough industries where technological change brings fruitful times in terms of profits. One example is the video game industry, where innovation plays a big role.
The publishers, Activision, saw their worldwide sales increase with $650m in the first five days, when the new video game "Call of Duty: Black Ops" replaced its predecessor, Call of Duty: Modern Warfare 2, in November 2010 (The Economist, December 10th 2011). (Another example is the IPhone launched by Apple was described by Time Magazine as "the invention of the year 2007". In 2011 net income was $7.31bn 1 (4.6bn) in the three months to 25 June, 125% higher than a year earlier and a record quarterly profit for the firm. Revenue was $28.6bn, also a quarterly record.)
We study the problem of a firm that produces with a current technology for which it faces a declining sales volume. It has two options: it can either exit this industry or invest in a new technology with which it can produce an innovative product. We distinguish between two scenarios in the sense that the resulting new market can be booming or ends up to be smaller than the old market used to be.
The speaker will be at ISEG during the afternoon after the talk, Professors and researchers interested in meeting the speaker should check the available meeting slots with
Raquel M. Gaspar