Tidd, Joe, John Bessant.
Managing Innovation: Integrating Technological, Market and
Organizational Change, Enhanced eText, 7th Edition, 7th Edition. Wiley, 12/2020.
CAPÍTULO 1 – INNOVATION, WHAT IT IS AND WHY IT MATTERS – PARTE 1
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CAPÍTULO 1 – INNOVATION, WHAT IT IS AND WHY IT MATTERS – PARTE 2
1.11 KEY ASPECTS OF INNOVATION
The overall innovation space provides a simple map of the table on which we might place our
innovation bets. But before making those bets, we should consider some of the other
characteristics of innovation that might shape our strategic decisions about where and when to
play. These key aspects include the following:
• Degree of novelty – incremental or radical innovation?
• Level of innovation – component or architecture?
• Platforms and families of innovations
• Timing – the innovation life cycle
• Discontinuous innovation – what happens when the rules of the game change?
We will explore these – and the challenges they pose for managing innovation – a little more in
the following section.
INCREMENTAL INNOVATION – DOING WHAT WE DO BUT BETTER
A key issue in managing innovation relates to the degree of novelty involved in different places
across the innovation space. Clearly, updating the styling on our car is not the same as coming up
with a completely new concept car that has an electric engine and is made of new composite
materials as opposed to steel and glass. Similarly, increasing the speed and accuracy of a lathe is
not the same thing as replacing it with a computer-controlled laser forming process. There are
degrees of novelty in these, running from minor, incremental improvements right through to
radical changes, which transform the way we think about and use them. Sometimes, these
changes are common to a particular sector or activity, but sometimes, they are so radical and far-
reaching that they change the basis of society – for example, the role played by steam power in
the Industrial Revolution or the ubiquitous changes resulting from today’s communications and
computing technologies.
As far as managing the innovation process is concerned, these differences are important. The
ways in which we approach incremental, day-to-day change will differ from those used
occasionally to handle a radical step change in product or process. But we should also remember
that it is the perceived degree of novelty that matters; novelty is very much in the eye of the
beholder. For example, in a giant, technologically advanced organization such as Shell or IBM,
advanced networked information systems are commonplace, but for a small car dealership or
food processor, even the use of a simple personal computer (PC) to connect to the Internet may
still represent a major challenge.
The reality is that although innovation sometimes involves a discontinuous shift, most of the
time it takes place in an incremental fashion. Essentially, this is product/process improvement
along the lines of ‘doing what we do, but better’ – and there is plenty to commend this approach.
For example, the Bic ballpoint pen was originally developed in 1957 but remains a strong
product with daily sales of 14 million units worldwide. Although superficially the same shape,
closer inspection reveals a host of incremental changes that have taken place in materials, inks,
ball technology, safety features and so on.
Another example of a small change that has had a big impact is the three-point seat belt,
originating in Volvo in 1959. Nils Bohlin came up with the simple idea of wrapping a belt of
fabric around the seats and anchoring it to the car’s chassis. Volvo opened up the patent to all
manufacturers, and the resulting innovation has saved hundreds of thousands of lives.
In a similar fashion, process innovation is mainly about optimization and getting the bugs out of
the system. (Ettlie suggests that disruptive or new-to-the-world innovations are only 6% to 10%
of all projects labelled innovation [38].) Studies of incremental process development (such as
Hollander’s famous study of DuPont rayon plants) suggest that the cumulative gains in
efficiency are often much greater over time than those that come from occasional radical changes
[39]. Other examples include Tremblay’s studies of paper mills, Enos’s on petroleum refining
and Figueredo’s of steel plants [40–42].
Continuous improvement of this kind received considerable attention as part of the ‘total quality
management’ movement in the late twentieth century, reflecting the significant gains that
Japanese manufacturers were able to make in improving quality and productivity through
sustained incremental change. But these ideas are not new – similar principles underpin the
famous ‘learning curve’ effect, where productivity improves with increases in the scale of
production; the reason for this lies in the learning and continuous incremental problem-solving
innovation that accompanies the introduction of a new product or process [43]. More recent
experience of deploying ‘lean’ thinking in manufacturing and services and increasingly between
as well as within enterprises underlines further the huge scope for such continuous innovation
[44].
COMPONENT/ARCHITECTURE INNOVATION AND THE IMPORTANCE
OF KNOWLEDGE
Another important lens through which to view innovation opportunities is as components within
larger systems. Rather similar to Russian dolls, we can think of innovations that change things at
the level of components or those that involve change in a whole system. For example, we can put
a faster transistor on a microchip on a circuit board for the graphics display in a computer. Or,
we can change the way several boards are put together into the computer to give it particular
capabilities – a games box, an e-book, a media PC. Or, we can link the computers into a network
to drive a small business or office. Or, we can link the networks to others into the Internet.
There’s scope for innovation at each level – but changes in the higher-level systems often have
implications for lower down. For example, if cars – as a complex assembly – were suddenly
designed to be made out of plastic instead of metal, it would still leave scope for car assemblers
– but would pose some sleepless nights for producers of metal components!
Innovation is about knowledge – creating new possibilities through combining different
knowledge sets. These can be in the form of knowledge about what is technically possible or
what particular configuration of this would meet an articulated or latent need. Such knowledge
may already exist in our experience, based on something we have seen or done before. Or, it
could result from a process of search – research into technologies, markets, competitor actions
and so on. And it could be in explicit form, codified in such a way that others can access it,
discuss it, transfer it and so on – or it can be in tacit form, known about but not actually put into
words or formulae.
The process of weaving these different knowledge sets together into a successful innovation is
one that takes place under highly uncertain conditions. We don’t know about what the final
innovation configuration will look like (and we don’t know how we will get there). Managing
innovation is about turning these uncertainties into knowledge – but we can do so only by
committing resources to reduce the uncertainty – effectively a balancing act.
A key contribution to our understanding here comes from the work by Henderson and Clark,
who looked closely at the kinds of knowledge involved in different kinds of innovation [45].
They argue that innovation rarely involves dealing with a single technology or market but rather
a bundle of knowledge, which is brought together into a configuration. Successful innovation
management requires that we can get hold of and use knowledge about components but also
about how those can be put together – what they termed the architecture of an innovation.
We can see this more clearly with an example. Change at the component level in building a
flying machine might involve switching to newer metallurgy or composite materials for the wing
construction or the use of fly-by-wire controls instead of control lines or hydraulics. But the
underlying knowledge about how to link aerofoil shapes, control systems, propulsion systems
and so on at the system level is unchanged – and being successful at both requires different and
higher-order set of competencies.
One of the difficulties with this is that innovation knowledge flows – and the structures that
evolve to support them – tend to reflect the nature of the innovation. So if it is at the component
level, then the relevant people with skills and knowledge around these components will talk to
each other – and when change takes place, they can integrate new knowledge. But when change
takes place at the higher system level – ‘architectural innovation’ in Henderson and Clark’s
terms – then the existing channels and flows may not be appropriate or sufficient to support the
innovation, and the firm needs to develop new ones. This is another reason why existing
incumbents often fare badly when a major system-level change takes place – because they have
the twin difficulties of learning and configuring a new knowledge system and ‘unlearning’ an old
and established one.
Figure 1.8 illustrates the range of choices, highlighting the point that such change can happen at
the component or subsystem level or across the whole system …
A variation on this theme comes in the field of ‘technology fusion’, where different
technological streams converge, such that products that used to have a discrete identity begin to
merge into new architectures. An example here is the home automation industry, where the
fusion of technologies such as computing, telecommunications, industrial control and elementary
robotics is enabling a new generation of housing systems with integrated entertainment,
environmental control (heating, air conditioning, lighting, etc.) and communication possibilities.
Similarly, in services, a new addition to the range of financial services may represent a
component product innovation, but its impacts are likely to be less far-reaching (and the
attendant risks of its introduction lower) than a complete shift in the nature of the service
package – for example, the shift to direct-line systems instead of offering financial services
through intermediaries.
Many businesses are now built on business models that stress integrated solutions – systems of
many components that together deliver value to end users. These are often complex,
multiorganization networks – examples might include rail networks, mobile phone systems,
major construction projects or design and development of new aircraft such as the Boeing
Dreamliner or the Airbus A-321. Managing innovation on this scale requires development of
skills in what Mike Hobday and colleagues call ‘the business of systems integration’ [46].
Figure 1.9 highlights the issues in managing innovation.
In Zone 1, the rules of the game are clear – this is about steady-state improvement to products or
processes and uses knowledge accumulated around core components.
In Zone 2, there is significant change in one element, but the overall architecture remains the
same. Here there is a need to learn new knowledge but within an established and clear
framework of sources and users – for example, moving to electronic ignition or direct injection
in a car engine, the use of new materials in airframe components, the use of IT systems instead
of paper processing in key financial or insurance transactions, and so on. None of these involve
major shifts or dislocations.
In Zone 3, we have discontinuous innovation where neither the end state nor the ways in which it
can be achieved are known about – essentially, the whole set of rules of the game changes, and
there is scope for new entrants.
In Zone 4, we have the condition where new combinations – architectures – emerge, possibly
around the needs of different groups of users (as in the disruptive innovation case). Here the
challenge is in reconfiguring the knowledge sources and configurations. We may use existing
knowledge and recombine it in different ways, or we may use a combination of new and old.
Examples might be low-cost airlines, direct line insurance and others.
PLATFORM INNOVATION
One way in which the continuous incremental innovation approach can be harnessed to good
effect is through the concept of ‘platforms’. This is a way of creating stretch and space around an
innovation and depends on being able to establish a strong basic platform or family, which can
be extended. Boeing’s 737 airliner, for example, was a major breakthrough innovation back in
1967 when it first flew – and it cost a great deal to develop. However, the robustness and
flexibility in the design means that many variants and improvements have been made over the
years, and the plane is still being manufactured today, nearly 60 years later! (Although the
attempts to develop a more fuel-efficient version, the 737 Max floundered because of pressures
inside the company to launch too soon and without adequate safety checks or pilot training.)
Rothwell and Gardiner call this kind of platform a ‘robust design’, and examples can be seen in
many areas [47].
Aircraft engine makers such as Rolls-Royce and General Electric work with families of core
designs, which they stretch and adapt to suit different needs, while semiconductor manufacturers
such as Intel and AMD spread the huge cost of developing new generations of chip across many
product variants [48]. Car makers produce models that, although apparently different in style,
make use of common components and floor pans or chassis. IBM’s breakthrough in the PC
industry was built on a platform architecture that was then opened up to many players to create
hardware and software applications – a forerunner of today’s mobile phone apps model. And in
consumer products, the ‘Walkman’ originally developed by Sony as a portable radio and cassette
system defined a platform concept (personal entertainment systems) that continued to underpin a
wide range of offerings from all major manufacturers deploying technologies such as minidisk,
CD, DVD, MP3 players and now smartphones. Lego’s highly successful toy business has
literally been built with the core brick set representing its platform for innovation over 70 years.
In processes, much has been made of the ability to enhance and improve performance over many
years from the original design concepts – in fields such as steel making and chemicals, for
example. Service innovation offers other examples where a basic concept can be adapted and
tailored for a wide range of similar applications without undergoing the high initial design costs
– as is the case with different mortgage or insurance products. Sometimes, platforms can be
extended across different sectors – for example, the original ideas behind ‘lean’ thinking
originated in firms such as Toyota in the field of car manufacturing – but have subsequently been
applied across many other manufacturing sectors and into both public and private service
applications including hospitals, supermarkets and banks [49].
Platforms and families are powerful ways for companies to recoup their high initial investments
in R&D by deploying the technology across a number of market fields. For example, Procter &
Gamble invested heavily in their cyclodextrin development for original application in detergents
but then were able to use this technology or variants on it in a family of products including odour
control (‘Febreze’), soaps and fine fragrances (‘Olay’), off-flavour food control, disinfectants,
bleaches and fabric softening (‘Tide’, ‘Bounce’, etc.). They were also able to license out the
technology for use in noncompeting areas such as industrial-scale carpet care and in the
pharmaceutical industry.
If we take the idea of ‘position’ innovation mentioned earlier, then the role of brands can be seen
as establishing a strong platform association, which can be extended beyond an initial product or
service. For example, Richard Branson’s Virgin brand has successfully provided a platform for
entry into a variety of new fields including trains, financial services, telecommunications and
food, while Stelios Haji-Ioannou has done something similar with his ‘Easy’ brand, moving into
cinemas, car rental, cruises and hotels from the original base in low-cost flying.
In their work on what they call ‘management innovation’, Julian Birkinshaw and colleagues
highlight a number of core organizational innovations (such as ‘total quality management’) that
have diffused widely across sectors [50]. These are essentially paradigm innovations, which
represent concepts that can be shaped and stretched to fit a variety of different contexts – for
example, Henry Ford’s original ideas on mass production became applied and adapted to a host
of other industries. McDonald’s owed much of their inspiration to him in designing their fast-
food business, and in turn, they were a powerful influence on the development of the Aravind
Eye Clinics in India, which bring low-cost eye surgery to the masses [51]. (We will return to this
important question of platforms in the next chapter.)
THE INNOVATION LIFE CYCLE – DIFFERENT EMPHASIS OVER TIME
We also need to recognize that innovation opportunities change over time. In new industries –
such as today’s biotech, Internet-software or nanomaterials – there is huge scope for
experimentation around new product and service concepts. But more mature industries tend to
focus more around process innovation or position innovation, looking for ways of delivering
products and services more cheaply or flexibly or for new market segments into which to sell
them. In their pioneering work on this theme, Abernathy and Utterback developed a model
describing the pattern in terms of three distinct phases (as we can see in Figure 1.10) [52].
Initially, under the discontinuous conditions, which arise when completely new technology
and/or markets emerge, there is what they term a ‘fluid phase’ during which there is high
uncertainty along two dimensions:
• The target – what will the new configuration be and who will want it?
• The technical – how will we harness new technological knowledge to create and deliver this?
No one knows what the ‘right’ configuration of technological means and market needs will be,
and so there is extensive experimentation (accompanied by many failures) and fast learning by a
range of players including many new entrepreneurial businesses.
Gradually, these experiments begin to converge around what they call a ‘dominant design’ –
something that begins to set up the rules of the game. This represents a convergence around the
most popular (importantly, not necessarily, the most technologically sophisticated or elegant)
solution to the emerging configuration. At this point, a ‘bandwagon’ begins to roll, and
innovation options become increasingly channelled around a core set of possibilities – what Dosi
calls a ‘technological trajectory’ [53]. It becomes increasingly difficult to explore outside this
space because entrepreneurial interest and the resources that it brings increasingly focus on
possibilities within the dominant design corridor.
This can apply to products or processes; in both cases, the key characteristics become stabilized,
and experimentation moves to getting the bugs out and refining the dominant design. For
example, the nineteenth-century chemical industry moved from making soda ash (an essential
ingredient in making soap, glass and a host of other products) from the earliest days where it was
produced by burning vegetable matter through to a sophisticated chemical reaction that was
carried out on a batch process (the Leblanc process), which was one of the drivers of the
Industrial Revolution. This process dominated for nearly a century but was in turn replaced by a
new generation of continuous processes that used electrolytic techniques and that originated in
Belgium, where they were developed by the Solvay brothers. Moving to the Leblanc process or
the Solvay process did not happen overnight; it took decades of work to refine and improve each
process and to fully understand the chemistry and engineering required to get consistent high-
quality output.
A similar pattern can be seen in products. For example, the original design for a camera is
something that goes back to the early nineteenth century and – as a visit to any science museum
will show – involved all sorts of ingenious solutions. The dominant design gradually emerged
with an architecture that we would recognize – shutter and lens arrangement, focusing principles,
back plate for film or plates and so on. But this design was then modified still further – for
example, with different lenses, motorized drives, flash technology – and, in the case of George
Eastman’s work, to creating a simple and relatively ‘idiot-proof’ model camera (the Box
Brownie), which opened up photography to a mass market. More recent development has seen a
similar fluid phase around digital imaging devices.
The period in which the dominant design emerges and emphasis shifts to imitation and
development around it is termed the ‘transitional phase’ in the Abernathy and Utterback model.
Activities move from radical concept development to more focused efforts geared around
product differentiation and to delivering it reliably, cheaply, with higher quality, extended
functionality and so on.
As the concept matures still further, incremental innovation becomes more significant and
emphasis shifts to factors such as cost – which means that efforts within the industries that grow
up around these product areas tend to focus increasingly on rationalization, on scale economies,
and on process innovation to drive out cost and improve productivity. Product innovation is
increasingly about differentiation through customization to meet the particular needs of specific
users. Abernathy and Utterback term this the ‘specific phase’.
Finally, the stage is set for change – the scope for innovation becomes smaller and smaller while
outside – for example, in the laboratories and imaginations of research scientists – new
possibilities are emerging. Eventually, a new technology that has the potential to challenge all
the by-now well-established rules emerges – and the game is disrupted. In the camera case, for
example, this is happening with the advent of digital photography, which is having an impact on
cameras and the overall service package around how we get, keep and share our photographs. In
our chemical case, this is happening with biotechnology and the emergence of the possibility of
no longer needing giant chemical plants but instead moving to small-scale operations using live
organisms genetically engineered to produce what we need.
Table 1.8 sets out the main elements of this model.
Although originally developed for manufactured products, the model also works for services –
for example, the early days of online banking were characterized by a typically fluid phase with
many options and models being offered. This gradually moved to a transitional phase, building a
dominant design consensus on the package of services offered, the levels and nature of security
and privacy support, the interactivity of website and so on. The field has now become mature
with much of the competition shifting to marginal issues such as relative interest rates and
targeting specific customer niches.
We should also remember that there is a long-term cycle involved – mature businesses that have
already gone through their fluid and transitional phases do not necessarily stay in the mature
phase forever. Rather, they become increasingly vulnerable to a new wave of change as the cycle
repeats itself – for example, the lighting industry has entered a new fluid phase based on the
applications of solid-state LED technology, but this comes after over 100 years of the
incandescent bulb developed by Swann, Edison and others. Their early experiments eventually
converged on a dominant product design after which emphasis shifted to process innovation
around cost, quality and other parameters – a trajectory that has characterized the industry and
led to increasing consolidation among a few big players. But that maturity has now given way to
a new phase involving different players, technologies and markets. Something similar is
happening in the automobile industry; after the initial fluid phase in the late nineteenth century,
the industry adopted the dominant design led by Ford’s Model T and the factory making it. But
we are now seeing a new fluid phase characterized by new technologies around autonomous
driverless vehicles, shifting ownership patterns, strong regulatory pressures around emissions
and the entry of new players such as Google, Apple and Tesla.
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.
DISCONTINUOUS INNOVATION – WHAT HAPPENS WHEN THE GAME
CHANGES?
Most of the time innovation takes place within a set of rules of the game, which are clearly
understood, and involves players trying to innovate by doing what they have been doing
(product, process, position, etc.) but better. Some manage this more effectively than others, but
the ‘rules of the game’ are accepted and do not change.
But occasionally, something happens, which dislocates this framework and changes the rules of
the game. By definition, these are not everyday events, but they have the capacity to redefine the
space and the boundary conditions – they open up new opportunities but also challenge existing
players to reframe what they are doing in the light of new conditions. This is a central theme in
Schumpeter’s original theory of innovation, which he saw as involving a process of ‘creative
destruction’ [20].
Case Study 1.8 discusses the example of the ice industry and its experience of discontinuous
innovation.
Change of this kind can come through the emergence of a new technology – similar to the ice
industry example (see Case Study 1.8). Or, it can come through the emergence of a completely
new market with new characteristics and expectations. In his famous studies of the computer
disk drive, steel and hydraulic excavator industries, Christensen highlights the problems that
arise under these conditions [55]. For example, the disk drive industry was a thriving sector in
which the voracious demands of a growing range of customer industries meant that there was a
booming market for disk drive storage units. Around 120 players populated what had become an
industry worth $18 billion by 1995 – and – similar to their predecessors in ice harvesting – it was
a richly innovative industry. Firms worked closely with their customers, understanding the
particular needs and demands for more storage capacity, faster access times, smaller footprints
and so on. But just as our ice industry, the virtuous circle around the original computer industry
was broken – in this case, not by a radical technological shift but by the emergence of a new
market with very different needs and expectations.
CASE STUDY 1.8
The Melting Ice Industry
Back in the 1880s, there was a thriving industry in the northeastern United States in the lucrative
business of selling ice. The business model was deceptively simple – work hard to cut chunks of
ice out of the frozen northern wastes, wrap the harvest quickly, and ship it as quickly as possible
to the warmer southern states – and increasingly overseas – where it could be used to preserve
food. In its heyday, this was a big industry – in 1886, the record harvest ran to 25 million tons –
and it employed thousands of people in cutting, storing and shipping the product. And it was an
industry with strong commitment to innovation – developments in ice cutting, snow ploughs,
insulation techniques and logistics underpinned the industry’s strong growth. The impact of these
innovations was significant – they enabled, for example, an expansion of markets to far-flung
locations such as Hong Kong, Bombay and Rio de Janeiro, where, despite the distance and
journey times, sufficient ice remained of cargoes originally loaded in ports such as Boston to
make the venture highly profitable [54]. But at the same time, as this highly efficient system was
growing, researchers such as the young Carl von Linde were working in their laboratories on the
emerging problems of refrigeration. It wasn’t long before artificial ice making became a reality –
Joseph Perkins had demonstrated that vaporizing and condensing a volatile liquid in a closed
system would do the job and in doing so outlined the basic architecture that underpins today’s
refrigerators. In 1870, Linde published his research, and by 1873, a patented commercial
refrigeration system was on the market. In the years that followed, the industry grew – in 1879,
there were 35 plants, and 10 years later, 222 making artificial ice. Effectively, this development
sounded the death knell for the ice-harvesting industry – although it took a long time to go under.
For a while, both industries grew alongside each other, learning and innovating along their
different pathways and expanding the overall market for ice – for example, by feeding the
growing urban demand to fill domestic ‘ice boxes’. But inevitably, the new technology took over
as the old harvesting model reached the limits of what it could achieve in terms of technological
efficiencies. Significantly, most of the established ice harvesters were too locked into the old
model to make the transition and so went under – to be replaced by the new refrigeration
industry dominated by new entrant firms.
The key point about this sector was that disruption happened not once but several times,
involving different generations of technologies, markets and participating firms. For example,
while the emphasis in the minicomputer world of the mid-1970s was on high performance and
the requirement for storage units correspondingly technologically sophisticated, the emerging
market for PCs had a very different shape. These were much less clever machines, capable of
running much simpler software and with massively inferior performance – but at a price that a
very different set of people could afford. Importantly, although simpler, they were capable of
doing most of the basic tasks that a much wider market was interested in – simple arithmetical
calculations, word processing and basic graphics. As the market grew so, learning effects meant
that these capabilities improved – but from a much lower cost base. The result was, in the end,
just as that of Linde and his contemporaries in the ice industry – but from a different direction.
Of the major manufacturers in the disk drive industry serving the minicomputer market, only a
handful survived – and leadership in the new industry shifted to new entrant firms working with
a very different model.
Discontinuity can also come about by reframing the way we think about an industry – changing
the dominant business model and hence the ‘rules of the game’. Think about the revolution in
flying that the low-cost carriers have brought about. Here the challenge came via a new business
model rather than technology – based on the premise that if prices could be kept low, a large new
market could be opened up. The power of the new way of framing the business was that it
opened up a new – and very different – trajectory along which all sorts of innovations began to
happen. In order to make low prices pay a number of problems needed solving – keeping load
factors high, cutting administration costs, enabling rapid turnaround times at terminals – but once
the model began to work, it attracted not only new customers but also increasingly established
flyers who saw the advantages of lower prices.
What these – and many other examples – have in common is that they represent the challenge of
discontinuous innovation. None of the industries were lacking in innovation or a commitment to
further change. But the ice harvesters, minicomputer disk companies or the established airlines
all carried on their innovation on a stage covered with a relatively predictable carpet. The trouble
was that shifts in technology, in new market emergence or in new business models pulled this
carpet out from under the firms – and created a new set of conditions on which a new game
would be played out. Under such conditions, it is the new players who tend to do better because
they don’t have to wrestle with learning new tricks and letting go of their old ones. Established
players often do badly – in part because the natural response is to press even harder on the pedal
driving the existing ways of organizing and managing innovation.
In the ice industry example, the problem was not that the major players weren’t interested in
R&D – on the contrary, they worked really hard at keeping a technological edge in insulation,
harvesting and other tools. But they were blindsided by technological changes coming from a
different field altogether – and when they woke up to the threat posed by mechanical ice making
their response was to work even harder at improving their own ice harvesting and shipping
technologies. 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 [56].
In a similar fashion, the problem for the firms in the disk drive industry wasn’t that they didn’t
listen to customers but rather that they listened too well. They build a virtuous circle of
demanding customers in their existing market place with whom they developed a stream of
improvement innovations – continuously stretching their products and processes to do what they
were doing better and better. The trouble was that they were getting close to the wrong
customers – the discontinuity that got them into trouble was the emergence of a completely
different set of users with very different needs and values.
Table 1.9 gives some examples of such triggers for discontinuity. Common to these from an
innovation management point of view is the need to recognize that under discontinuous
conditions (which thankfully don’t emerge every day), we need different approaches to
organizing and managing innovation. If we try and use established models that work under
steady-state conditions we find – as is the reported experience of many – we are increasingly out
of our depth and risk being upstaged by new and more agile players.
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 that 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 such as 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 a shift.
While some research suggests that the existing incumbents do badly when discontinuous change
triggers a new fluid phase, we need to be careful here [57]. Not all existing players do badly –
many of them are able to build on the new trajectory and deploy/leverage their accumulated
knowledge, networks, skills and financial assets to enhance their competence through building
on the new opportunity [58,59]. Equally, while 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 is helpful in the mature phase but can actively militate against the entry and success in
the fluid phase of a new technology. How do enterprises pick up signals about changes if they
take place in areas where they don’t normally do research? How do they understand the needs of
a market that doesn’t exist yet but that will shape the eventual package, which becomes the
dominant design? If they talk to 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 involves trying to develop ways of managing innovation not only under ‘steady
state’ but also under the highly uncertain, rapidly evolving and changing conditions, which result
from a dislocation or discontinuity. The kinds of organizational behaviour needed here will
include things such as agility, flexibility, the ability to learn fast, the lack of preconceptions
about the ways in which things might evolve and so on – and these are often associated with new
small firms. There are ways in which large and established players can also exhibit this kind of
behaviour, but it does often conflict with their normal ways of thinking and working.
Worryingly, the source of the discontinuity that destabilizes an industry – new technology,
emergence of a new market, rise of a new business model – often comes from outside that
industry [60]. So even those large incumbent firms that take time and resources to carry out
research to try and stay abreast of developments in their field may find that they are wrong-
footed by the entry of something that has been developed in a different field. The massive
changes in insurance and financial services that have characterized the shift to online and
telephone provision were largely developed by IT professionals often working outside the
original industry. In extreme cases, we find what is often termed the ‘not invented here’ – NIH –
effect, where a firm finds out about a technology but decides against following it up because it
does not fit with their perception of the industry or the likely rate and direction of its
technological development. Famous examples of this include Kodak’s rejection of the Polaroid
process or Western Union’s dismissal of Bell’s telephone invention. In a famous memo dated
1876, the board commented, ‘this “telephone” has too many shortcomings to be seriously
considered as a means of communication. The device is inherently of no value to us’.
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