The pattern can be seen in many studies and its implications for innovation management are important. In particular it helps us understand why established organizations often find it hard to deal with discontinuous change. Organizations build capabilities around a particular trajectory and those who may be strong in the later (specific) phase of an established trajectory often find it hard to move into the new one. The example of the firms which successfully exploited the transistor in the early 1950s is a good case in point – many were new ventures sometimes started by enthusiasts in their garage yet they rose to challenge major players in the electronics industry like Raytheon. This is partly a consequence of sunk costs and commitments to existing technologies and markets and partly because of psychological and institutional barriers. They may respond but in slow fashion and they may make the mistake of giving responsibility for the new development to those whose current activities would be threatened by shift.
Importantly the fluid or ferment phase is characterized by co-existence of old and new technologies and by rapid improvements of both. It is here that the so called sailing ship effect can often be observed in which a mature technology accelerates in its rate of improvement as a response to a competing new alternative as was the case with the development of sailing ships in competition with newly emerging steamship technology.
Whilst some research suggests existing incumbents do badly, we need to be careful here. Not all existing players do badly –many of them are able to build on the new trajectory and deploy / leverage their knowledge networks skills and financial assets to enhance their competence through building on the new opportunity. Equally whilst it is true that new entrants often small entrepreneurial firms play a strong role in this early phase we should not forget that we see only the successful players. We need to remember that there is a strong ecological pressure on new entrants which means only the fittest or luckiest survive.
It is more helpful to suggest that there is something about the ways in which innovation is managed under these conditions which poses problems. Good practice of the steady state kind described above is helpful in the natural phase but can actively mitigate against the entry and success in the fluid phase of a new technology. How do enterprises pick up signals about changes if they place in areas where they don’t normally do research? How do they understand the needs of a market which doesn’t exist yet but which will shape the eventual package which becomes the dominant design? If they talk on their existing customers the likelihood is that those customers will tend to ask for more of the same, so which new users should they talk to – and how do they find them?
The challenge seems to be to develop ways of managing innovation not only under steady state but also under the highly uncertain rapidly evolving and changing conditions which results from a dislocation or discontinuity. The kinds of organizational behavior needed here will include things like agility, flexibility the ability to learn fast, the lack of preconceptions about the ways in which things might evolve etc – and these are often associated with new small firms. There are ways in which large and established players can also exhibit this kind of behavior but it does often conflict with normal ways of thinking and working.
Extensive studies have shown the power of shifting technological boundaries in creating and transforming industry structures – for example in the case of the typewriter, the computer and the automobile. Such transformations happen relatively often – no industry is immune.
Source: JEO TIDD