The history of modern enterprise is built on innovative products and services that offer new features to consumers in a more competitive manner. Competitiveness is defined by not only the performance of the product in terms of meeting the functional needs of the consumer in a more exceptional manner but also the looks and appeal of the product satisfying the esteem needs of the consumer in a more elegant manner. The first time a product is invented and commercialized, it tends to get absolute acceptance regardless of the level of competitiveness. However, as follow-on products are developed and introduced, competitiveness becomes a matter of enhanced cost leadership and product/service differentiation. The ability of a firm to remain in the lead depends on the capability to keep developing technologies organically within its core industry, and to keep absorbing technologies from other related and unrelated industries inorganically.
In certain product groups, the basic product performance parameters remain unchanged over years. For example, from the time of the invention of the first automobile by Ford or Daimler, the fundamental parameters of the automobile continue to be the speed and fuel consumption. Over time, however, a whole series of additional parameters such as shape, looks, aerodynamics, safety, reliability, maintainability, automatic transmission systems, off-road drivability characteristics, entertainment and communication systems, global positioning systems, lighting systems, and such other innovative features have started to define the competitive profile of an automobile for different usage characteristics, and user profiles. Each of these has been stimulated by advancements in related sciences and technologies. The bottom line in this and other cases, be it a watch, camera or television, is that the basic product and function remain but the product configuration and the functional delivery are significantly different.
Functions remain, products exit and enter
There are, however, certain cases in which even though the function remains the product gets substituted by a new product or gets supplemented by other products due to technological and competitive forces. For example, the large transistor based radio has given way to miniaturized electronics based radio. The dot matrix printer has given way to ink jet and laser jet printers. The conventional gramophone record and box type television sets have been phased out by compact disc and flat panel televisions respectively. On the other hand, manual watches have been supplemented by digital watches. Several other products fall in this category of supplementation; fixed telephones by cellular phones; desktop computers by laptop, net-book and tablet computers; photo stands by digital photo stands; incandescent bulbs by fluorescent lamps, compact fluorescent bulbs and LED lights; fountain pens by ball point and roller point pens; tea leaves by instant tea bags; and bottled drinks by canned drinks, to quote just a few examples.
In a related manner, products that are supplemented, and hence are under the threat of losing product hegemony, attempt to modernize and reinvent themselves. A classic case is one of the mechanical watch industry, which reinvented the mechanical watches through superior craftsmanship. So has been the case of the fountain pen industry with a focus on premium craftsmanship. A more recent case is that of the camera industry which has been facing competition from mobile phones which enable quick upload of photos through wireless network. The camera industry has initially attempted to retain its competitive edge through more sophisticated lens and shooting options. With the availability of high quality cameras in cell phones, the camera industry has now begun to introduce cameras with wireless capability to enable users upload pictures and films to the Net or share with friends.
At times innovative firms tend to be prisoners of their innovation and the resultant market domination. Not many firms undertake a systematic review of their competitive strategy based on the Porter Five Forces model, in which the threat of substitute products, the threat of new entrants and the industry rivalry are three of the five important competitive forces. An analysis of these forces should dictate the formulation of the competitive strategy of a firm, resulting in the three generic strategies of cost leadership, product differentiation and niche. Probably, even in the companies that have a robust long range planning process, the analysis tends to be more introverted than extraverted, preventing an objective analysis of the impending competition. The ability of the company to listen to the vendors and customers, and watch the competitive moves of the other players is a vital ingredient of such proactive approach. This is one reason for Porter suggesting competitor analysis and market signals as critical components of a long range planning exercise.
Many times, however, the rigid viewpoints of the leadership on the superiority and sustainability of its core technologies leads to a casual approach towards the impending competitive threats. This factor may be called the technological obduracy of a firm. The intransigence of the firm’s scientific and technical leadership of the firm, enhanced by the unwillingness of corporate leadership to invest the company’s top dollars in genuine innovation, contribute to technological obduracy. The early gains of market expansion and penetration due to greater sales and marketing efforts provides an unreal estimate of the product’s life cycle to such firms. While an extended product life cycle is possible with annual and semi-annual model changes and other strategies of lifecycle management, each such strategy may only be temporarily insulating against competition and masking the vulnerability of the firm’s core technologies to more innovative and intuitive technologies.
Peaks of obduracy
After 120 years of life Eastman Kodak, the greatest imaging company ever, became a faded memory this year, filing for bankruptcy. Over time, the company rested on its ones pioneering technologies and failed to come up with new versions of its products that will fend off competition from the new innovators such as Sony and several others. Kodak further failed to leverage its core competences and capabilities in photography chemistry to expand into emerging industries, as other late 19th century American companies did. More importantly, it failed to recognize in time the advent of digital photography and its role in, and gain from, the Internet revolution. The technological obduracy coupled with the ebbing of the entrepreneurial spirit of Kodak led to the demise of the company. While not in all cases technological obduracy leads to corporate demise, it does bruise segments of the business and impacts the growth potential of the overall company.
One of the classic cases of such bruise has been that of Sony in the television arena. Sony was the uncrowned king of televisions with its patented Trinitron cathode ray tube (CRT) technology, introduced in 1966. Trinitron picture tube has been the most innovative CRT technology introduced in televisions since the 1950s. With successive improvements, the Trinitron technology provided Sony with a perception of invincibility in the television domain. The obsession with CRT televisions made Sony somewhat blasé about the imminent threat from flat panel televisions, yielding the pride of place to Samsung. The first commercial LCD was introduced by Sharp Corporation in 1988 and the Korean manufacturers Samsung and LG began to drive the flat panel television market from the 1990s. Sony eventually withdrew Trinitron based CRT televisions in 2008. Sony had to buy the flat panels from Samsung, and also enter into a joint venture with Samsung to ensure for itself a constant access to flat panels and flat panel technologies.
The technology space has several other cases like Sony’s. Microsoft’s Zune music system failed to make its mark due to it being a standalone product, without an appropriate music distribution ecosystem. The earlier versions of tablets launched in early 2000s failed because of lack of appropriate tablet-friendly operating system. Nokia failed to see, at first, the emergence of smart phone market and later the importance of an appropriate operating system for an efficient smart phone. Nokia’s obduracy in staying with Symbion for several years has, in no small measure, led to the further decline of its smart phone franchise. This is also validated by the resurgence of its Lumia smart phone series with smart phone friendly Windows mobile operating system. Failures are also not necessarily related only to single corporation actions; even collective participation of technological giants offers little protection against failures triggered by obduracy. For example, around 2001, a Sony led consortium and a Toshiba led consortium proposed their respective Blu-ray DVD and HD DVD formats and fought a bitter war for over seven years, which saw swaying loyalties of the consortium partners, each either a technology giant or media mogul. Toshiba’s technological obduracy was no small factor in prolonging the war of formats with several millions of dollars wasted until the Toshiba consortium called off its format in 2008.
Irrationality of obduracy
Despite the threat of commercial obscurity, it is surprising how technological obduracy prevails in organizations. The reasons are many; fundamentally, it requires an entrepreneurial and innovative mindset at the leadership level to establish and nurture an organization that is ahead in technology. It also requires an ability to integrate inputs and skill sets from different domains, including vendor base and marketplace to create new products and services that are refreshingly fresh and tantalizingly competitive. It requires an organizational culture and mindset that encourages patenting and publications by scientific and technical personnel, with due intellectual property protection of course, of state-of-the-art developments. It also requires an introspective, objective ability on the part of the company to analyze its products and services and abort ill-fated missions early on. Not many organizations are equipped to think and execute this way.
The irrationality of obduracy has also a strong behavioral component. The typical human unwillingness to admit failure, which extends often to even corporate behavior, is a key factor. At another end, being sold on one’s own success beyond contemporaneous relevance is another. The typical managerial fallibility of not wanting to give the best to the consumer until the consumer or regulator demands or the competition provides a more impressive experience acts as a behavioral speed breaker. A general lack of culture of innovation, accentuated by an authoritarian and unforgiving style of leadership also makes an organization become averse to experimentation. Non-availability of processes in the organization to analyze the risk-reward aspects of new product developments makes an organization risk-averse, with a resultant propensity to stay in the comfort zone. Probably, the behavioral aspects of obduracy would need to be addressed first by the leadership on an organization-wide basis prior to launch of major projects of technological innovation in a top-down manner.
The rationality of innovation
Innovation has a rationality that primes the organization for continuous and sustainable growth. Innovation works on reinforcing core competencies, leveraging them to enter into adjacencies and seeking new core competencies in a virtuous cycle. Corning, for instance, survived and thrived by leveraging its core capabilities, the processing of glass substances, to develop a string of blockbuster products, the glass for Edison’s electric lamp, the traditional TV tubes, the heat-resistant glass for missiles and kitchen ware, the fiber-optic cables that power the Internet, and the glass for flat panel TVs. Procter & Gamble has also survived and prospered by constantly replenishing and expanding its product portfolio to address emerging consumer needs. Toyota has absorbed alternative drive and energy technologies to develop the world’s leading hybrid vehicle, Prius.
Innovation comes bundled with fallibility, and risk of failure. Innovation rests on research and experimentation as much as on hypothesizing and serendipity. It is not that all of Apple products have been roaring successes; neither have all the successive versions of Windows software have been equal or increasing successes. Innovative organizations, besides possessing the requisite scientific and technological skills have the intuitive ability to spot failures early and use them as stepping stones for future successes. But for this ability, Sony would not have been able to come back into the game with the Bravia series of flat panel televisions nor Microsoft would have been able to innovate a new hardware success in Xbox series of gaming devices. If technological obduracy causes commercial obscurity, conversely technological innovation leads to commercial sustainability.
Posted by Dr CB Rao on February 19, 2012