☕ Good Morning! Sippers,

Here are this week’s notes!

How Can Great Firms Fail? Insights from the Hard Disk Drive Industry

The chapter begins with the author’s quest to solve the mystery of why the best companies fail. His friend advised him to study the disk drive industry because it experiences changes in technology, market structure, global scope, and vertical integration more rapidly than any other industry.

The history of the disk drive industry reveals a framework for understanding when to listen to customers and when to avoid doing so. The chapter provides insights into the robustness of this framework and the dangers of blindly following the maxim that good managers should keep close to their customers.

🖥️💾 Understanding the Disk Drive Industry:

Disk drives write and read the information that computers use. They consist of read-write heads mounted at the end of an arm that swings over the surface of a rotating disk, disks coated with magnetic material, electric motors, and electronic circuits that control the drive’s operation and its interface with the computer.

In the disk drive industry, most technological changes have sustained or reinforced established trajectories of product performance improvement. These improvements have followed a series of intersecting technology S-curves, where movement along a given S-curve is generally the result of incremental improvements within an existing technological approach, whereas jumping onto the next technology curve implies adopting a radically new technology.

🚀 Disruptive Technologies:

However, there have only been a few other sorts of technological changes, called disruptive technologies. The most essential disruptive technologies were the architectural innovations that shrunk the size of the drives, from 14-inch diameter disks to 8-inch, 5.25-inch, and 3.5-inch diameter disks.

📈 Factors for Success and Failure:

The best firms in the disk drive industry succeeded by listening responsively to their customers and investing aggressively in the technology, products, and manufacturing capabilities that satisfied their customers’ next-generation needs.

However, paradoxically, the best firms subsequently failed for the same reasons. The author notes that this is one of the innovator’s dilemmas, where blindly following the maxim that good managers should keep close to their customers can sometimes be a fatal mistake.

🤔 Key Takeaways:

The history of the disk drive industry reveals a framework for understanding when to listen to customers and when to avoid doing so. Most technological changes have sustained or reinforced established trajectories of product performance improvement, while only a few have been disruptive.

The best firms succeeded by listening responsively to their customers and investing aggressively in the technology, products, and manufacturing capabilities that satisfied their customers’ next-generation needs. However, the same approach led to their failure, demonstrating the innovator’s dilemma.

Via, The Innovator’s Dilemma.

The Power of Expectations

Expectations are powerful because they are the goals you set for yourself. However, setting expectations too low can hinder your performance, while setting them too high can lead to disappointment. We explore how expectations set the standard for our performance and how they affect our behavior.

Setting Goals Improves Performance 🚀

The goal of setting a goal is not to achieve it but to improve performance. Setting expectations sets the standard to which you aspire. By setting higher expectations, even if you don’t achieve them, you can change your behavior and ultimately lead to better performance.

The Pygmalion Effect and Stereotyped Threat 🎭

Expectations of others, even if we are unaware of them, can affect our performance. The Pygmalion Effect demonstrated how elementary school teachers unconsciously behaved in ways that encouraged or discouraged the success of their students.

Researchers also investigated the stereotyped threat, where the concern people feel about confirming a negative stereotype about the group they belong to produces anxiety, lowered expectations, and reduced performance. For example, white and black athletes playing golf under the stereotype that white athletes are successful because they are smart and black athletes are successful because they are athletically resulting in black athletes underperforming white athletes.

Gender Stereotypes Affect Performance Too 🚺🚹

Gender stereotypes affect performance in various ways. Managers assigned lower raises to women than to equally performing men, expecting men to ask for more. Women, on the other hand, were expected to accept their raises without question.

A study of Harvard Business School graduates found that female MBA graduates accepted starting salaries and yearly bonuses lower than their male counterparts, mainly because of their expectations. When expectations were equated by providing information about current salaries and bonuses, the negotiating behaviors and outcomes were the same for both men and women.

In another study, participants were primed with negative male and female stereotypes, affecting the expectations of their performance in negotiations. Male negotiators are expected to perform significantly worse than their female counterparts when exposed to the negative male stereotype.

Changing Expectations Leads to Better Outcomes 💡

Changing expectations about what is possible in a negotiation can lead to better outcomes. If you don’t expect much when negotiating, it’s not surprising that you receive less. The more uncertain you are about negotiating, the more likely you are to accept less.

In conclusion, expectations drive behavior, and setting goals can improve performance. The Pygmalion Effect and stereotyped threat demonstrate how the expectations of others can affect our performance.

Gender stereotypes also affect performance, but changing expectations lead to better outcomes. By setting higher expectations and changing our expectations about negotiations, we can achieve better outcomes.

Via, Getting more of what you want.