The Innovator's Solution

To hammer home this message, Luczo takes dozens of senior Seagate executives on an annual multiday retreat, where they must form five-person teams and climb ropes, ride mountain bikes, and face other challenges. The twist: The members are judged by the performances of their entire team. The result: Stars learn that their personal success doesn't count for much. The only way the team can do well is if everyone helps the person who's having the hardest time.

Those lessons become invaluable when Seagate is racing to get a new disk drive into production. "If something is going wrong," Luczo says, "we want to bring in everyone who can help. The worst thing that can happen is for someone to hide a minor problem until it becomes a major one."

Intense teamwork can also help Seagate make the most of its successes. Well before the Barracuda IV was ready for manufacturing, the company flew several of its top Asian-plant managers to Colorado to sit in on weeks of development meetings and to see how the new drive was taking shape. Managers were encouraged to question anything that looked odd or inefficient, so that when the final design was locked in, it would be one that their factories could produce with total efficiency.

"You could see the old silo mentality starting to break down," explains Rob Pait, a member of the Barracuda IV launch team. "Problems were resolved in days instead of weeks. It was a real interdisciplinary effort." And when Seagate did begin production, its factories were able to escalate from careful test runs of 10,000 drives a week to full-bore production of 1 million drives a week in record time.

Set some prices lower, so new markets can grow. In its long-established markets, Seagate can charge anywhere from $50 to $500 per drive without alarming anyone. Its machines typically account for 8% to 13% of the cost of a desktop computer or server, which are often priced in the thousands of dollars.

"But consumer devices only get interesting if the whole device costs less than $499," says Dexheimer. "They only get really interesting below $199. And they begin to get phenomenally interesting when they start at $99."

The upshot: If Seagate wants to take those new markets by storm, it needs to be comfortable selling much different drives at much lower prices. Typically, technology leaders can't stomach such low-end projects. Their internal culture points them toward developing sophisticated -- and costlier -- products that cater to their best customers. But Seagate has detached some of its leading mavericks to pursue cheap mass markets -- ones that don't look anything like the enterprise-computing business.

"There are all kinds of ways that disk drives could become important parts of handheld devices," Dexheimer explains. "Right now, there are at least six distinct markets. Several of them have significant potential. And we want to play there."

For the Xbox game console, Seagate proved that it could meet price points and manufacture a much smaller disk drive with just one-tenth of the storage of its high-end computer drives. (Game consoles don't require as much storage.) Seagate officials won't talk in detail about their profit margins on mass-market projects like the Xbox. But Dexheimer suggests that Seagate is comfortable pursuing less profit now in hopes of bigger gains later.

"This is a young and very promising market," he explains. "You could see our whole industry selling 200 million drives a quarter -- up from 50 million today -- if we really penetrate the home consumer market. And down the road, we might see customers wanting more-powerful drives to download new versions of games from the Internet. When a market has that kind of potential, you want to make sure you're helping it grow."

At Harvard Business School, Professor Christensen is watching his old favorite industry's most recent transformation with considerable interest. "The fundamental elements of The Innovator's Dilemma are always at work within all companies," he says. "It's like the laws of gravity. But in the same way that airplanes can fly, companies can sometimes overcome some of these pressures. If Seagate is figuring out how to sell smaller, cheaper, and simpler drives to a big new class of customers, it has a high probability of success."

Or, as several Seagate executives put it, "Around here, the mantra is, 'Stand still, and you die.' "

George Anders (ganders@fastcompany.com) runs Fast Company's West Coast bureau from San Francisco. For a collection of articles on innovative best practices in Silicon Valley, click here.