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Disruptive innovators can hurt successful and immensely profitable inc

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New post 07 Sep 2018, 20:05
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Disruptive innovators can hurt successful and immensely profitable incumbents that tend to ignore the markets most susceptible to disruptive innovations. Disruptive innovators offer technologically straightforward solutions consisting of off-the-shelf components put together in a product architecture that is often simpler, initially lower performing, and cheaper than established approaches. Considering disruptive technologies unprofitable, the executives at incumbents often ignored them at their own and companies’ peril. In 1981, the old 8 inch drives used in mini computers were "vastly superior" and much more profitable to the new 5.25 inch drives used in desktop computers. However, 8 inch drives were not affordable for the new desktop machines. Slowly, the makers of 5.25 inch drives improved the performance of the drives and moved the 8 inch drive companies that did not invest in the 5.25 inch technology out of the market as the latter could not compete on price. Similarly, digital cameras, when introduced in 1997 performed extremely poorly as compared to traditional film cameras. Consequently, many traditional film companies such as Kodak ignored this market only to be bankrupted by the rise of digital cameras a decade later.

Leaders and strategists should be cautious while rejecting a technology that does not seem to be as high performing and hence not as profitable as their dominant technologies. A technology that initially provides low performance can drastically improve over time and often exceed the performance of the dominant technology at a much lower price-point, a scenario that could potentially bankrupt the incumbents who ignored the technology at their peril.

1. The passage provides information in support of which of the following assertions?

A. The downsides of ignoring to invest in a new technology often outweigh the money savings associated with the same.
B. A company that ignores a disruptive technology may find itself on the brink of bankruptcy as the technology improves.
C. Most technologies that initially offer inferior solutions to an existing problem improve to an extent that they exceed the performance required.
D. Disruptive innovators are always successful in driving the incumbents out of the market.
E. None of the companies who produced the 8 inch drives were able to survive once the performance of the 5.25 inch drive improved considerably.



2. The author of the passage would make which of the following recommendations to the managers of the incumbents.

A. Before rejecting a technology that performs poorly when compared to an existing technology, the managers should carefully evaluate whether the technology can improve to a point to be disruptive.
B. They should only invest in new technologies that have the potential to disrupt their business model and throw them out of business.
C. They should take into account the long term shareholder returns before rejecting any new technology.
D. They should always be wary of start-ups in their industry as they have a potential to disrupt the incumbent’s operating business model.
E. Before investing huge sums of money in in-house Research and Development, they should evaluate technologies that have the potential to disrupt the enhancements produced by the R&D teams.



3. Which of the following exemplifies a technological disruption as described in the passage through the 8 inch and 5.25 inch disc drive example?

A. Personal computers that initially are extremely unreliable and require frequent service become so reliable that over 90% of the service people deployed to service the personal computers are let go.
B. Circuit city - a specialty electronics retail chain was bankrupted as general purpose retailers such as Walmart and Target started carrying electronics.
C. Apple takes over the casual computing marketing previously dominated by the netbook by introducing the iPad that provides a different level of experience over the general PC experience.
D. Mini mills, such as those operated by companies such as Nucor, that initially made lowest grade steel improve their quality to the extent that they are able to compete with large steel mills on quality while beating them on price.
E. DVDs and Blue Ray discs drive out the slightly cheaper VHS tapes as the tapes are not able to match the discs in terms of quality and convenience.



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New post 09 Sep 2018, 00:42
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1. The passage provides information in support of which of the following assertions?


A. The downsides of ignoring to invest in a new technology often outweigh the money savings associated with the same.

INCORRECT The passage specifically talks about disruptive technologies and not broadly about all new technologies.

B. company that ignores a disruptive technology may find itself on the brink of bankruptcy as the technology improves.

Correct The passage talks about disruptive technologies and how successful companies that ignore disruptive technologies suffer when disruptive technologies improve.

C. Most technologies that initially offer inferior solutions to an existing problem improve to an extent that they exceed the performance required.

INCORRECT The passage specifically talks about disruptive technologies. This option talks about most new technologies. There is no mention in the passage about solving existing problems.

D. Disruptive innovators are always successful in driving the incumbents out of the market.

INCORRECT The passage doesn't say that disruptive innovators are always successful.

E. None of the companies who produced the 8 inch drives were able to survive once the performance of the 5.25 inch drive improved considerably.

INCORRECT The passae states that only those 8 inch drive technology companies that didn't invest in 5.25 inch drive went out of the market. This option says that all 8 inch drive technology companies went out of the market.

2. The author of the passage would make which of the following recommendations to the managers of the incumbents.


A. Before rejecting a technology that performs poorly when compared to an existing technology, the managers should carefully evaluate whether the technology can improve to a point to be disruptive.

Correct This option seems like the recommendation that the author would make to the managers of the incumbents.

B. They should only invest in new technologies that have the potential to disrupt their business model and throw them out of business.

INCORRECT The author doesn't recommend investing ONLY in disruptive technologies.

C. They should take into account the long term shareholder returns before rejecting any new technology.

INCORRECT Shareholder returns are not discussed in the passage.

D. They should always be wary of start-ups in their industry as they have a potential to disrupt the incumbent’s operating business model.

INCORRECT The passage doesn't talk about startups. Operating business model is not discussed in the passage.

E. Before investing huge sums of money in in-house Research and Development, they should evaluate technologies that have the potential to disrupt the enhancements produced by the R&D teams.

INCORRECT There is no mention of spending on R&D

3. Which of the following exemplifies a technological disruption as described in the passage through the 8 inch and 5.25 inch disc drive example?


Relevant excerpt from the passage.

In 1981, the old 8-inch drives used in mini computers were "vastly superior" and much more profitable to the new 5.25 inch drives used in desktop computers. However, 8-inch drives were not affordable for the new desktop machines. Slowly, the makers of 5.25-inch drives improved the performance of the drives and moved the 8-inch drive companies that did not invest in the 5.25-inch technology out of the market as the latter could not compete on price.


The passage talks about two products. 8-inch is the established product and 5.25. inch product is the new one.

Initially,
-> Initially the Quality of 8-inch >> Quality of 5.25 inch.
-> cost of 8-inch >> cost of 5.25 inch.

Finally,
-> Initially the Quality of 8-inch ~ Quality of 5.25 inch.
-> cost of 8-inch >> cost of 5.25 inch.
-> 8-inch loses and 5.25 inch wins.

A. Personal computers that initially are extremely unreliable and require frequent service become so reliable that over 90% of the service people deployed to service the personal computers are let go.

INCORRECT Only 1 product, personal computers, is discussed in this option. The other entity is service

B. Circuit city - a specialty electronics retail chain was bankrupted as general purpose retailers such as Walmart and Target started carrying electronics.

INCORRECT Doesn't have the same parallel reasoning from the passage

C. Apple takes over the casual computing marketing previously dominated by the netbook by introducing the iPad that provides a different level of experience over the general PC experience.

INCORRECT Initially itself the new product has better quality than old product. No parallel reasoning.

D. Mini mills, such as those operated by companies such as Nucor, that initially made lowest grade steel improve their quality to the extent that they are able to compete with large steel mills on quality while beating them on price.

CORRECT This example has the same parallel reasoning as mentioned in the passage.

Large stell mills = 8-inch drives
Nucor steel = 5.25-inch drives.

E. DVDs and Blue Ray discs drive out the slightly cheaper VHS tapes as the tapes are not able to match the discs in terms of quality and convenience.

INCORRECT No parallel reasoning. The new product is better and more expensive than the old product.
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New post 07 Sep 2018, 21:56
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Can someone please explain how "D" is the answer for Q3 and not E?
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New post 07 Sep 2018, 22:34
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rana2103 wrote:
Can someone please explain how "D" is the answer for Q3 and not E?


rana2103

I will post the explanations once I get a few more responses or by the end of today. Please check this topic tomorrow.
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New post 07 Sep 2018, 23:14
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rana2103 wrote:
Can someone please explain how "D" is the answer for Q3 and not E?

It's given in the passage that the new technology might be inferior to existing but in due time, it can become superior.So, the competitor will become strong and existing technology will lose.
Read line 3, para 2 " A technology that initially provides low performance can drastically improve over time and often exceed the performance of the dominant technology at a much lower price-point"

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Re: Disruptive innovators can hurt successful and immensely profitable inc  [#permalink]

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New post 07 Sep 2018, 23:19
1
1. The passage provides information in support of which of the following assertions?

A. The downsides of ignoring to invest in a new technology often outweigh the money savings associated with the same.
B. A company that ignores a disruptive technology may find itself on the brink of bankruptcy as the technology improves.
C. Most technologies that initially offer inferior solutions to an existing problem improve to an extent that they exceed the performance required.
D. Disruptive innovators are always successful in driving the incumbents out of the market.
E. None of the companies who produced the 8 inch drives were able to survive once the performance of the 5.25 inch drive improved considerably.

First 2 lines of Para 1 says "Disruptive innovators can hurt successful and immensely profitable incumbents that tend to ignore the markets most susceptible to disruptive innovations."
Last sentence of para 1 says "Similarly, digital cameras, when introduced in 1997 performed extremely poorly as compared to traditional film cameras. Consequently, many traditional film companies such as Kodak ignored this market only to be bankrupted by the rise of digital cameras a decade later."
Combining these 2 together gives B as answer
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New post 07 Sep 2018, 23:22
2. The author of the passage would make which of the following recommendations to the managers of the incumbents.

A. Before rejecting a technology that performs poorly when compared to an existing technology, the managers should carefully evaluate whether the technology can improve to a point to be disruptive.
B. They should only invest in new technologies that have the potential to disrupt their business model and throw them out of business.
C. They should take into account the long term shareholder returns before rejecting any new technology.-
D. They should always be wary of start-ups in their industry as they have a potential to disrupt the incumbent’s operating business model.
E. Before investing huge sums of money in in-house Research and Development, they should evaluate technologies that have the potential to disrupt the enhancements produced by the R&D teams.

"Disruptive innovators offer technologically straightforward solutions consisting of off-the-shelf components put together in a product architecture that is often simpler, initially lower performing, and cheaper than established approaches. Considering disruptive technologies unprofitable, the executives at incumbents often ignored them at their own and companies’ peril"[/color]

Clear A
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New post 07 Sep 2018, 23:33
3
rana2103, let me take this chance to explain Q3,

in the 8 inch - 5.25 inch example, the author tends to explain that when both the drives were in the market, 8 inch drives were vastly superior to the 5.25 ones. Slowly 5.25 inch drives were improved enough to supercede the 8 inch ones, beating them in prices and equaling them in performance. Since 8 inch could not survive the price competition, they moved out of the market. The example in choice D says just that. Mini mills (intially making low grade steel) improved the metal quality enough not only to match high grade steel but also to beat it on prices. While Choice E says DVD and blurays eliminated the slightly cheaper option because of its better quality. Choice E is therefore the opposite of the example given in the passage.

Please hit kudos if that helps.

workout, await your inputs.
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Re: Disruptive innovators can hurt successful and immensely profitable inc  [#permalink]

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New post 08 Sep 2018, 02:31
3
Quote:
1. The passage provides information in support of which of the following assertions?

A. The downsides of ignoring to invest in a new technology often outweigh the money savings associated with the same.
B. A company that ignores a disruptive technology may find itself on the brink of bankruptcy as the technology improves.
C. Most technologies that initially offer inferior solutions to an existing problem improve to an extent that they exceed the performance required.
D. Disruptive innovators are always successful in driving the incumbents out of the market.
E. None of the companies who produced the 8 inch drives were able to survive once the performance of the 5.25 inch drive improved considerably.


As per the passage option B is most fitting.

Option A mentions downside of ignoring to invest outweighs the money savings associated with it. This is too generic and its not necessary all the time. In some cases maybe, but this can't be said in all cases. This has not been implied in the passage.
Eliminate A.

In option C - Most technologies that initially offer inferior solutions to an existing problem improve to an extent that they exceed the performance required.
We are not told that most technologies improve to an extent that they exceed the performance required. The word most is used incorrectly. Eliminate C.

In option D- Disruptive innovators are always successful in driving the incumbents out of the market.
Again, we can't say this happens always. Eliminate D.

In option E- None of the companies who produced the 8 inch drives were able to survive once the performance of the 5.25 inch drive improved considerably.
We are not given any information about this in the passage. Eliminate E.

Coming to option B, which is the right answer,
A company that ignores a disruptive technology may find itself on the brink of bankruptcy as the technology improves.
Yes, the examples that the passage provides imply that a company that ignores a disruptive technology may find itself on the brink of bankruptcy.

Quote:
2. The author of the passage would make which of the following recommendations to the managers of the incumbents.

A. Before rejecting a technology that performs poorly when compared to an existing technology, the managers should carefully evaluate whether the technology can improve to a point to be disruptive.
B. They should only invest in new technologies that have the potential to disrupt their business model and throw them out of business.
C. They should take into account the long term shareholder returns before rejecting any new technology.
D. They should always be wary of start-ups in their industry as they have a potential to disrupt the incumbent’s operating business model.
E. Before investing huge sums of money in in-house Research and Development, they should evaluate technologies that have the potential to disrupt the enhancements produced by the R&D teams.


Following the process of elimination :
A. Before rejecting a technology that performs poorly when compared to an existing technology, the managers should carefully evaluate whether the technology can improve to a point to be disruptive.
Yes, I feel this makes sense as managers should evaluate whether the technology can grow to a point to affect the business. And this is the correct answer!

B. They should only invest in new technologies that have the potential to disrupt their business model and throw them out of business.
The word only is misleading. This has not been implied int he passage. We can safely eliminate B.

C. They should take into account the long term shareholder returns before rejecting any new technology.
This is not true, because the technology might not perform well currently but it might improve in the future. This depends from tech to tech and whether they will be able to improve the technology.
Eliminate C.

D. They should always be wary of start-ups in their industry as they have a potential to disrupt the incumbent’s operating business model.
The managers might not be aware of the start-ups in the industry that may have a potential to disrupt the business model. Eliminate D.

E. Before investing huge sums of money in in-house Research and Development, they should evaluate technologies that have the potential to disrupt the enhancements produced by the R&D teams.
This is not mentioned in the passage and is out of scope. Eliminate E.

Quote:
3. Which of the following exemplifies a technological disruption as described in the passage through the 8 inch and 5.25 inch disc drive example?

A. Personal computers that initially are extremely unreliable and require frequent service become so reliable that over 90% of the service people deployed to service the personal computers are let go.
B. Circuit city - a specialty electronics retail chain was bankrupted as general purpose retailers such as Walmart and Target started carrying electronics.
C. Apple takes over the casual computing marketing previously dominated by the netbook by introducing the iPad that provides a different level of experience over the general PC experience.
D. Mini mills, such as those operated by companies such as Nucor, that initially made lowest grade steel improve their quality to the extent that they are able to compete with large steel mills on quality while beating them on price.
E. DVDs and Blue Ray discs drive out the slightly cheaper VHS tapes as the tapes are not able to match the discs in terms of quality and convenience.



Now, we are looking for an answer choice which is similar to what happened to the 8 inch and 5.25 inch disc drives.
A can be easily eliminated because it does not concern a disruptive technology taking over by improving its technology. B also can be eliminated as it is not similar to what happened with the disc drives.
In C we are told the iPad takes over casual competing by providing a new level of experience, this is not an example of a disruptive tech, the iPad was launched to be superior to the other technologies. We can eliminate C.
In E as well, the VHS tapes are driven out because they could not match the discs in terms of quality and convenience. Eliminate E.
Now in option D, it is very similar to what happened with the discs - Mini mills improved their technologies to such an extent that they could compete with large steel mills. The quality was of same level plus prices were cheaper.
So D is the clear winner.

Wow, that was one long post. Do press kudos if this helped :-)
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New post 08 Sep 2018, 04:29
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rana2103 wrote:
Can someone please explain how "D" is the answer for Q3 and not E?


This is the only option which speaks of all three aspects mentioned in the passage, namely product improvement, beating the larger firm on quality and having a better price
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Re: Disruptive innovators can hurt successful and immensely profitable inc  [#permalink]

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New post 08 Sep 2018, 23:46
1
1. The passage provides information in support of which of the following assertions?

A. The downsides of ignoring to invest in a new technology often outweigh the money savings associated with the same.
B. A company that ignores a disruptive technology may find itself on the brink of bankruptcy as the technology improves. is supported by A technology that initially provides low performance can drastically improve over time and often exceed the performance of the dominant technology at a much lower price-point, a scenario that could potentially bankrupt the incumbents who ignored the technology at their peril.
C. Most technologies that initially offer inferior solutions to an existing problem improve to an extent that they exceed the performance required.
D. Disruptive innovators are always successful in driving the incumbents out of the market.
E. None of the companies who produced the 8 inch drives were able to survive once the performance of the 5.25 inch drive improved considerably.

2. The author of the passage would make which of the following recommendations to the managers of the incumbents.

A. Before rejecting a technology that performs poorly when compared to an existing technology, the managers should carefully evaluate whether the technology can improve to a point to be disruptive. is supported by Leaders and strategists should be cautious while rejecting a technology that does not seem to be as high performing and hence not as profitable as their dominant technologies
B. They should only invest in new technologies that have the potential to disrupt their business model and throw them out of business.
C. They should take into account the long term shareholder returns before rejecting any new technology.
D. They should always be wary of start-ups in their industry as they have a potential to disrupt the incumbent’s operating business model.
E. Before investing huge sums of money in in-house Research and Development, they should evaluate technologies that have the potential to disrupt the enhancements produced by the R&D teams.

3. Which of the following exemplifies a technological disruption as described in the passage through the 8 inch and 5.25 inch disc drive example?

A. Personal computers that initially are extremely unreliable and require frequent service become so reliable that over 90% of the service people deployed to service the personal computers are let go.
B. Circuit city - a specialty electronics retail chain was bankrupted as general purpose retailers such as Walmart and Target started carrying electronics.
C. Apple takes over the casual computing marketing previously dominated by the netbook by introducing the iPad that provides a different level of experience over the general PC experience.
D. Mini mills, such as those operated by companies such as Nucor, that initially made lowest grade steel improve their quality to the extent that they are able to compete with large steel mills on quality while beating them on price. From the passage we can identify that 8 inch was more profitable and had better quality. Overtime the 5.5 matched/improved the quality and became lower in price, hence more profitable
E. DVDs and Blue Ray discs drive out the slightly cheaper VHS tapes as the tapes are not able to match the discs in terms of quality and convenience.
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Re: Disruptive innovators can hurt successful and immensely profitable inc  [#permalink]

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New post 19 Sep 2018, 07:12
Got 3/3 in 5:10

Notes looked like this:

P1: New disruptive tech - simple, cheap - beats incumbents
ex:drives, cameras

P2: Warning to managers
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Re: Disruptive innovators can hurt successful and immensely profitable inc &nbs [#permalink] 19 Sep 2018, 07:12
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