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HP:the flight of the kittyhawk Case Study Terrin Thampan(3256300) & Yuan He (3248529) BA4101 Professor Daniel Doiron 4/11/2011 c

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  Hewlett-Packard Company (HP), was one of the largest electronic instrument companies in 1980s and it was the leader in the printer industry. The company believed that technology innovation is the key to the success. HP adopted a management-by-objective (MOB) process to focus on the corporation¶s financial goal and engaged its employees on their potential innovation ideas and strategies to achieve its goals. HP preferred a decentralized organization structure because this structure allows decisions and movements could be freely made. HP had 4 business organizations ³Test & Measurement, Computer systems, Measurement System and Computer products´. These organizations consisted of laser printer, ink-jet printer, personal computer, and mass storage product group. The mass storage product group was responsible for developing and managing Hp¶s storage technology. Disk Memory Division (DMD) was part of the mass storage product group. Kittyhawk, the new 1.3-inch disk drive technology, was developed within this division and the Kittyhawk project team was responsible for launching the new hard-disk drive to the world.

 

  

 
 In 1992 HP introduced a new disk drive, Kittyhawk, it was the smallest drive in the world. Compared to its predecessor that had a size of 1.8-inch, Kittyhawk disk drive was sized at 1.3-inch and consumed less power. It only took HP one year to develop Kittyhawk. A year before introducing the new diver, Kittyhawk project leader, Bruce Spenner, believed the 1.3-inch disk drive was the next big innovative priority of the DMD division. He needed full support from the DMD group to support this project. However, the managers at DMD¶s research and development department still had doubts about this new project. Firstly, they thought that this new project would conflict with the division¶s existing markets. Secondly, they believed that its next generation higher-gigabyte product line should be their major priority because the market of the 1.3-inch disk drive was not clear. For instance, the project manager required that engineers joining Kittyhawk project sign a creed, ³I am going to build a small, dumb, cheap disk drive!´, two engineers rejected the request because they didn¶t know who the target customer were and returned to HP¶s mainstream.

Xven though Spenner setup a term for the new project, Spenner and another manager had a hard time defining the target market. After some individual market research, they found a few opportunities but the small disk drive market was still not clear. So the project team contacted a reliable market research firm to identify markets to introduce the drive. In the end they had to choose between two options. One, develop cheap $50 disk drives and create a new market gradually. Second, develop $130 fully featured disk drive for the mobile computing market. Developing next generation smaller disk drive and identifying the target market for it were the uncertainties associated with Kittyhawk. However, the project was still undertaken and three years later, Kittyhawk failed and HP exited from disk drive market.

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 ´c Hp culture deeply valued technological innovation as a keep to success. The innovation of 1.3inch disk driver perfectly fitted Hp¶s culture and was possible to have more support from top managers.

´c Decentralized organizational structure gave more freedom of decision making and movement for new projects. Kittyhawk was benefited from the organizational structure. The project term moved for DMD and had to the power to make timely decision.

´c The Kittyhawk project had support from senior management. Bruce Spenner, the executive sold the idea to Hackborn, the executive vice president of the computers organization, and he agreed with the project. With his approval, every will fell into line. Xven Hp¶s CXO frequently visited the project term.

´c Kittyhawk term is strong term. Spenner picked the best and brightest people who can do the job. For instance, Seymour and White had the reputation for quick and reaction.

´c Short developing cycle. Generally, Hp needed 18 months development time for a new hard disk drive. Kittyhawk only took 12 months. Thus hp could enter the small driver market faster than other.

´c ùew technology. The project term developed many new technologies for the new driver such as a new glass disk substrate in case the need of increase storage in the future and a new piezoelectric accelerometer, which can protect the drive in 3 foot drops. The drive was smaller and lighter.

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´c Conflicts between DMD and Kittyhawk project. Some managers of DMD thought that the new innovation could conflict with DMD¶s undertakings to stay at the top of their market. They believed next generation high gigabyte driver should be the priority of the division¶s product line.

´c The existing customers of DMD are not interested in Kittyhawk. It is because laptop and desktop manufactures were interested in the capacity and cost of megabyte but not size. Those manufacture preferred high speed and lager capacity such as 2.5inch disk drivers.

´c Aggressive growth model. The project planned to accomplish a break even time of less than 36 months and achieve $100 million revenue rate in 2 years after launch. They expected to be the industry leader had growth rate around 35%.

´c High price. At the planning stage, the project planned to make a driver for $49.95 but they failed making a driver lower than $50. Instead the price of the driver was twice more than customers preferred.

´c Wrong target market. 

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   ´c The need of smaller driver for PDA. The PDA market is developing and it could be next big thing hit the market. Many companies spent hundreds of millions of dollar to develop their own PDA.

´c Smaller diver for game cartridges. Software writer wanted to write more complex games. They were looking for large capacity storage device with cheap price. The marketing manager of ùintendo said that they were interested in Kittyhawk if the price is under $50.

´c ånexpected customers. Several customers showed their interest in the 1.3inch disk driver such as Japanese Kanji, manufactures of cash registers and digital camera producer.  X
     
  ´c In competition with 1.8 inch disk drive. 1.8inch hard disk drive would be most predictable next generation driver. It has larger capacity but consume more power than 1.3-inch disk drive.

´c PDA market failed. The PDA manufacturers found that the sales were disappointing and most of them withdrew form the market. Thus the market demand of 1.3-inch decreased.

´c Flash drive market was increasing but it was costly for customers.

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 1.c Construct smaller unique structural product designs. Xnable such products to tap into and explore new technological ways of adapting applications of magnetic data storage and retrieval in an economically feasible manner.

2.c Create sustaining technological developments, by leaving room for continuous improvements in performance based on the feedback of customers.

3.c ùew entrants in the market ran the forefront of creating and adopting disruptive technologies instead of previously renowned and established firms within the industry.

    
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Senior management had provided full support for the Kittyhawk project. HP setup an autonomous group to focus on this project. The project had full financial support and the group had the freedom to function separately from the rest of the company. The group consisted of the best and brightest people within the organization and worked in a team environment.

Through this environment the Kittyhawk team was able to go beyond the 2.5-inch disk drive and create the new 1.3-inch disk drive with 20 megabyte. They had incorporated a new glass disk substrate into the device, which could increase storage capacity in the future. The team members believed that if this disk technology in combination with other custom components could increase the capacity up to 200 MB. In addition to that, it required less power, was lightweight, and had increased functionality. A new piezoelectric accelerometer protected the physical drive if dropped from a 3-foot height.

 

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The 1.3-inch disk drive technology was intended to be the next innovative disruption within the disk drive industry. It had the potential to enter a new and non-competitive market. Similar to the independent established businesses like, 14-inch drive for mainframe market, 8inch drive for minicomputer market, 5.25-inch drive for desktop PC market, 3.5-inch drive for portables market, and 2.5-inch drive for notebook market. This new market when identified would expand and slow the growth of these established businesses. With improvements made over time, it was intended to reduce the size of the old market.



  
 
   
 The value network is the context, within which a firm identifies & responds to its customers needs. It assists in solve their problems and creates an avenue to procure inputs and improve. It helps in responding to competitor¶s actions in a strategic and efficient manner and ultimately assists in generating and sustaining profit for the firm.

When the Kittyhawk project was launched, the project team had already set the date of completion, and goals of growth for this disruptive technology without considering who their customers are. The team had lost sight of the initial reason of Kittyhawk¶s existence, ³to build a small, dumb, cheap disk drive!´.

In the pursuit of constructing this innovative technology, that reason had transformed to creating and positioning Kittyhawk as the best disk drive technology at a high price. The goal was to capture market share fast and generate profits quickly. Instead, of the disruptive technology being priced below $50, it was priced at $250. This decision was final because the team had pressure to meet the break even in 36 month and generate $100 million revenue in 2 years.

To achieve this goal, they decided to target the mobile computing market consisting of PDA, and gaming console market. To meet demands of these customers, these disk drives had to be fully featured and designed. To meet the requirement, the group needed to incorporate these new features, which lead to increased costs up to $130 to make each driver. The high costs and low sales in the mobile computing market had led to the failure of Kittyhawk¶s launch and HP exiting the disk drive market.

HP got carried away focusing their disk drive technology on these established and emerging markets in which performance expectation are high. It lead the company to make highly expensive products to satisfy customers in emerging markets. It had broken the law of disruptive innovation.

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Kittyhawk project team should have continued with their initial plan of creating cheap

$50 disk drives. By introducing these cheap disk drives to low end and new customers, they could work on improving the disk drives performance based of the feedback from their customers. In addition to that, they could also identify new ways to adapt their disk drive through their customers.

Kittyhawk should have been introduced in the low-end customer spectrum, like the gaming console market, which was interested in the using cheap $50 disk drive and use the increased storage space. They should have gradually infiltrated more mature markets when they had better featured and performing product. The drawback of this recommendation is the high costs involved in funding a breakthrough in design and the time spent pursuing it. The only way to generate profits and recover research and developments costs is to have high sales volume of the cheap disk drives. 

#     Kittyhawk¶s failure to launch as an innovative disruptor can be associated to its innovators decisions on failing to understand their value network. Positioning Kittyhawk as a childs plaything would have lead HP to create new customers and gradually a new market. However, the need to grow quick and compete in established markets had lead them to an ultimatum. To stop pursuing breakthroughs in the disk drive industry entirely.

   

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    Strengths

Weaknesses

Hp culture and organizational structure

Conficts between DMD and kittyhawk

Senior management support

Cannot meet requirement for laptop or desktop

Strong development term

Aggressive growth model or goal

Short developing cycle

High developing cost and sale price

ùew technology Opportunities

Threats

PDA

1.8 inch disk drive

game cartridges

Fialure of PDA market

ånexpected customers

Flash drive

            

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Strengths Hp culture and organizational structure Senior management support Strong development term Short developing cycle ùew techology Weaknesses Conficts between DMD and kittyhawk Cannot meet requirement for laptop or desktop Aggressive growth model or goal High developing cost and sale price 


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Opportunities PDA game cartridge ånexpected customers-cheap disk drives Threats 1.8 inch disk drive Fialure of PDA market

Flash drive 


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   Christensen, C. M. (2006). `
  
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. ùew York: Collins Business Xssentials. Christensen, C. M. (January 01, 2006). Hewlett-Packard: The Flight of the Kittyhawk (A).