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A 11 managers face problems in overcoming inertia and implementing innovation and change. But why is this problem such an enduring one? Organizations are filled with sensible people and usually led by smart managers. Why is anything but incremental change often so difficult for the most successful organizations? And why are the patterns of success and failure so prevalent across industries and over time? To remain successful over long periods, managers and organizations must be ambidextrous-able to implement both incremental and revolutionary change.
Patterns in Organization Evolution
Across industries there is a pattern in which success often precedes failure. But industry-level studies aren't very helpful for illustrating what actually went wrong. Why are managers sometimes ineffective in making the transition from strength to strength? To understand this we need to look inside firms and understand the forces impinging on management as they wrestle with managing innovation and change. To do this, let's examine the history of two firms, RCA semiconductors and Seiko watches, as they dealt with the syndrome of success followed by failure.
The stark reality of the challenge of discontinuous change can be seen in Figure 1. This is a listing of the leading semiconductor firms over a forty-year period. In the mid-1950s, vacuum tubes represented roughly a $700 million market. At this time, the leading firms in the then state-of-the-art technology of vacuum tubes included great technology companies such as RCA, Sylvania, Raytheon, and Westinghouse. Yet between 1955 and 1995, there was almost a complete turnover in industry leadership. With the advent of the transistor, a major technological discontinuity, we see the beginnings of a remarkable shakeout. By 1965, new firms such as Motorola and Texas Instruments had become important players while Sylvania and RCA had begun to fade. Over the next 20 years still other upstart companies like Intel, Toshiba, and Hitachi became the new leaders while Sylvania and RCA exited the product class.
Why should this pattern emerge? Is it that managers and technologists in 1955 in firms like Westinghouse, RCA, and Sylvania didn't understand the technology? This seems implausible. In fact, many vacuum tube producers did enter the transistor market, suggesting that they not only understood the technology, but saw it as important. RCA was initially successful at making...