Chapter 2 of Wharton on emerging technologies deals with the major mistakes committed by established organizations when adopting emerging technologies. Authors discuss the traps an established company might fall into while dealing with emerging technologies.
Day and Schoemaker categorize these pitfalls into four:
Delayed participation: Delayed participation is nothing but the wait and watch approach of the incumbent companies in order to avoid risks and losses from emerging technologies. Authors state some of the reasons for the delayed participation of the incumbent companies in emerging technologies as:
Managers’ of the established companies fail to recognize the future potential of emerging technologies because of their preconceived notions.
Established companies delay their participation with opinion that the emerging technologies are for smaller organization.
Approach new technologies, with the same principles applied to the current technologies
Authors suggest certain guidelines to follow in order to avoid delayed participation traps. Incumbent companies -
Should have vision and imagination about the emerging technologies’ future,-should know about the customers’ need of emerging technologies.
Should keep in mind that the emerging technologies are not for the current customer needs. I think this is the most important one – any technology should serve the end-client well. In today’s technology frenzy – that’s something that is easily forgotten.
Should estimate the risks involved and the future risks.
Should look for the similar past experiences or look for the companies who adopted similar emerging technologies. In short – learn from other’s mistakes. This one would be tough since emerging technologies are typically very new. By the time we have some case studies to follow it is most likely a somewhat established technology rather than an emerging technology. So more likely scenario would be that you (meaning the company adopting the emerging technology) would be an example of success (or failure) for other companies to follow.
Sticking with familiarity: The second trap for incumbent companies is sticking with familiarity. Authors say that the incumbent companies prefer to stick to familiar areas rather than enter new horizons; this is because of the fear of risks and ambiguity involved in emerging technologies. Organizations fall into this kind of trap when they over or under estimate the capabilities of emerging technologies.
In order to avoid this trap authors suggest that the incumbent companies should have:
Strong knowledge about industry standards.
Managers should come out of their narrow minded approach
Finding and learning from the companies who already faced such situations.
Reluctance to fully commit: This is the third trap dicussed by the authors. Incumbent companies will fall into this trap because of- Managers’ reluctance due to the fear of loss of the profits of the existing products. The authors presented the example of IBM and DEC companies’ reluctance to enter into distributed networks thinking that it would lead to loss of mainframes market and risk-taking attitude of the managers. Certainty effect is one of the reasons for the incumbent companies to fall into reluctance to fully commit trap i.e., incumbent companies think that investing in the incremental innovations is more profitable rather than in the uncertain emerging technologies. The other reasons to fall prey to this trap are established companies’ focus on current needs of the customer rather foreseeing the future needs, inertia, due to path dependency i.e., leaning towards past or traditional approach. I must also add here that there is always some level of complacency on the part of established companies since they are doing well at that moment so they tend to think that nothing needs to change.
Lack of Persistence: The last trap discussed about the companies lack of persistence. Companies lose patience when expected results are not seen. Authors say that low persistence could be due to sunk cost fallacy- decision to abandon the emerging technologies at the budding stage because of the losses incurred initially. Knight Rider, Inc, withdrawal from many emerging technologies over the years due to the negative financial results is good example of low persistence. Day & Schoemaker also gives an example of USA Today newspaper which through their sheer perseverance became a winner even though it had to incur losses for 10 continuous years.
Authors also provide four solutions that help established firms to avoid pitfalls in emerging technologies:
Widening peripheral vision: Incumbent companies should look for the signals when an emerging technology is entering the market. Though finding the indicators is difficult, authors provide few techniques to look for signals, such as which emerging technologies are important, studying or working with the lead – users of the new technologies, emerging technologies’ advantages to customers, market adoption and future of the technology.
Creating a learning culture: Authors suggest that collective learning is important when looking at emerging technologies. Organizational learning such as open to different viewpoints, willingness to take up new challenges, continuous experimentation and communication, rather than individual learning is the key solution to avoid traps.
Staying flexible in strategic ways: Organizational flexibility is one of the keys to avoid traps. The success of Microsoft in the uncertain emerging technologies is due to its flexibility to adapt to the changing trends. In spite of stiff competition from companies like Apple, IBM etc, Microsoft emerged as a leader due to its flexible approach towards emerging technologies.
Providing organizational autonomy: Fourth solution provided by the authors, is that incumbent companies should treat emerging technologies as a separate entity. This will enable the established companies to look at emerging technologies with a new mind-set. Not only is this approach useful to the parent company but also for the smaller company, where the new team can have the freedom to approach emerging technologies in different way. The book also discusses the degree of separation between parent and child companies and also how much independence is optimal, does the parent company need to cannibalize itself and synergy between the two companies.
This chapter concludes by saying that success of any incumbent company in embracing disruptive technologies depends on the continuous support from the senior management, creating a separate unit of the new technology, willingness to take risks and have organizational and strategic flexibility.
On the whole I thought this was a very interesting chapter. There are few points in there which are a bit predictable and many that are thought provoking. The authors’ attempt to categorize the various pitfalls made interesting reading and was easy to understand
Throughout the chapter I see that there is a stereotype that all managers and stakeholders are not risk takers. There is a lot of persuasion from the authors to take the necessary risks but there is little in terms of warning against taking too much risk. I think we can add a little text to the chapter about the pitfalls of rushing to adopt an emerging technology without giving enough thought and pitfalls created by over eager and higher risk taking managers.
I agree with you, the chapter was laid out in a manner that was very easy to understand and follow. I thought it was a lot more interesting than the first one. It was briefly mentioned in the first chapter about rushing into adopting an emerging technology before the consumer market was ready for the product or before the product was fully developed. I found this article http://etech.eweek.com/content/mobile_and_wireless/the_biggest_emerging_technology_disappointments_of_2007.html that talks about the biggest emerging technology disappointments of 2007. It's pretty interesting that some of them were considered listed as failing in 2007, but were featured in WEF 2008 and 2009 (Virtual Private Worlds, for example). So I guess this goes to show even with too much risk or rushing to the market too fast, a company can still be successful in the long run. Maybe if Apple had created another version of the PDA (after the Apple), they would have succeeded? An emerging technology can succeed even after a company fails to successfully market the technology, but I guess this goes back to one of Wharton's reasons why incumbents fail with emerging technologies - “lack of persistence.”
ReplyDeleteI discovered an interesting new technology and I thought I would share with you. It's a Nano-sized radio.
ReplyDeleteAccurately more nano than the iPod Nano, a radio built out of a single carbon nanotube that detects and plays songs was singled out in the latest issue of Scientific American as one of the first truly functional nanoscale devices that has a “measurable effect on the larger, macroscale world.”
The nanotube radio was developed in 2007 by physicist Alex Zettl and his colleagues at the University of California, Berkeley. It is a fully functional, fully integrated radio receiver, orders-of-magnitude smaller than any previous radio.
Why the nanotube radio sticks out as a milestone in the world of nanotechnology two years after its development is likely two-fold. For one, a functioning miniature of an everyday electronic device that qualifies as a nanoscale machine is pretty cool. Secondly, it’s an achievement that’s relatively easier to understand as compared to most emerging nanotechnology-based applications, especially those in the area of computing and biotechnology.
And here’s how it works : “The single nanotube serves, at once, as all major components of a radio: antenna, tuner, amplifier, and demodulator.Moreover, the antenna and tuner are implemented in a radically different manner than traditional radios, receiving signals via high frequencymechanical vibrations of the nanotube rather than through traditional electrical means.
Source: http://blogs.zdnet.com/emergingtech/?p=1198
This chapter was much better than the first one, it really started dealing with some of the managerial issues. I particularly like the questions the authors list after describing each of the pitfalls. I think keeping these near by and truly answering them from time to time can help any manager in any environment improve themselves, their processes and their business.
ReplyDeleteI also really like their points about divergent thinking leading to convergent solutions as well as deep dialog. The first is the idea that many different views, opinions and thoughts can lead to one great idea. The second goes in line with the first somewhat, by breaking down barriers and making people comfortable with expressing their opinions great thoughts can come out into the open and "collective learning" can truly occur.