Staving Off a Spiral Toward Oblivion
DRIVEN by the pressure to innovate, companies facing major technological change have wholeheartedly embraced management gurus’ advice on how to develop creative, breakthrough products. As a result, corporate America is flush with incubators, skunk works and innovation silos.
But has the pendulum swung too far? New technologies are obviously important, but even in today’s fast-paced environment, they can take a long time to substitute for the old. In the meantime, incremental innovation based on old technologies can help a company survive.
When Sony announced its Mavica electronic camera in 1981, headlines trumpeted that “Film Is Dead.” But it took 28 more years for Kodachrome, the film immortalized by Paul Simon, to finally die this past June.
E-book software by companies like Electronic Book Technologies was released in the early 1990s. Yet despite the recent buzz over the Kindle and other electronic reading devices, e-books are still less than 5 percent of overall book sales.
The reality is that most technologies eventually die. But unlike the ancient Greeks, who believed their destiny was controlled by the Fates, today’s managers need not assume that an old technology’s fate is predetermined. Companies can proactively manage the innovation endgame. Continuing improvements to extend the life of technology, particularly given the attractive margins on the old, can be a wise business decision — and not necessarily a reflection of narrow-mindedness.
The key is to extend the profitable life of the old just long enough to have a fighting chance in the new. But how?
Customers move at different speeds, so investments should be focused on market segments that most value the old. Criticisms of Kodak’s digital strategy abound, but one overlooked strength has been its ability to maintain its market position in segments like motion pictures, which, though small, are moving to digital more slowly.
History provides another illustration. Mechanical machines that used molten lead had dominated the typesetter industry for more than 60 years when photography-based machines were introduced in 1949. Along with many new entrants, the leading old-technology companies, Mergenthaler Linotype and Intertype, invested heavily in the new technology.
But the mechanical technology “was well known by the people who were using it,” Carl Schlesinger, a former typesetter operator for The New York Times and author of two books on the history of printing, said in a recent interview. The new technology required customers, particularly unionized newspapers, to make huge investments in retraining.
So throughout the 1950s and ’60s, Mergenthaler Linotype and Intertype continued to develop highly innovative mechanical machines, Herb Klepper, a lead engineer for Mergenthaler at the time, said in a recent interview. The speed of the old machines more than doubled, and newspapers kept using them. By 1978, when The Times retired its old mechanical machines, Mergenthaler Linotype was an established leader in the new technology, and Intertype, while not a leader, had survived to move on to yet the next generation of technology, digital typesetters.
Now, of course, newspapers are struggling to extend the life of print so they can develop new capability and business models for the Web and other forms of electronic distribution.
One mechanism for extending the life of the old is to borrow from the new. Daniel C. Snow, a Harvard Business School professor, says that the useful life of the carburetor was extended significantly by incorporating technology from electronic fuel-injection. Interestingly, he finds that only companies that were also developing electronic fuel-injection technology benefited.
The old can also create a bridge to the new through hybrid products that combine elements of each. Research on electric vehicles has been under way for many years, but a direct leap from gasoline-powered vehicles to electric vehicles has proved challenging.
“Hybrids were an easy way for carmakers to start this transition,” says Felix Kramer, founder of CalCars, a nonprofit organization. Because the required shift in behavior is minimal, many drivers have been willing to make the change. Later, as these drivers become accustomed to the electric-vehicle features of hybrids — the quiet ride, for example — they will presumably become more willing to acquire a purely electric vehicle.
“Once they started down that road, it pointed to the future of plug-in hybrids,” says Mr. Kramer, whose organization promotes the plug-in vehicles. While hybrids like the Toyota Prius use electricity as a supplement, plug-in hybrids go the next step and rely primarily on electricity, with gasoline as the secondary energy source.
“Because of plug-in hybrids, the supply chain and all the technologies will improve, so we gradually get batteries that are cheaper with longer range, and eventually we get all-electric vehicles,” he explains.
OF course, managers still need to know when to move on. When steamships began to compete with sailing ships for freight traffic, the sailing-ship producers responded with what the technology historian S. C. Gilfillan described in his 1935 book, “Inventing the Ship,” as a “noble flowering of the sailing ship.”
But the producers went too far. By 1902, with the building of the Thomas W. Lawson, the largest sailing ship ever, with seven masts and 25 sails, sailing technology had reached a point of diminishing returns, and the competition with steamships had already been lost.
Ultimately, it’s all about balance. The future of a company depends on success in the new. But the old needn’t be framed as simply as a “cash cow” or as a source of inertia holding back the company’s creative juices. Selective, intelligent innovation in the old may just hold the key to the future.