Older Technologies Sometimes Regain the Lead Over Newer Ones

(p. R8) Innovation occurs almost constantly at the level of design and components, absorbing companies’ attention as they look for ways to best their competitors. Platform innovations are less frequent. But when they do occur, they have the potential to transform markets, not just give an edge to one competitor.

One great danger to companies is to be so immersed in design and component innovation that they miss out on a platform innovation. For example, while Sony Corp. focused in the 1990s on improving its CRT television sets, a market it dominated, rival Samsung Electronics Co. invested heavily in flat-screen LCD TVs. As the market for LCD TVs grew, Sony fell behind its rivals and ended up entering into a joint venture with Samsung to build liquid-crystal displays.

Innovation’s Messy Paths
Another mistake to avoid is to assume that all technologies follow a standard progression.
The conventional wisdom is that the performance of any technology is initially low, then improves rapidly after some breakthrough, and ultimately levels out in maturity. A new technology’s performance supposedly starts below that of the established technology, surpasses it after the breakthrough is achieved, and then remains superior until the next big thing comes along. Literature on the subject has encouraged managers to embrace a new technology once it begins to show rapid improvement, and to abandon the old technology because it is destined to become obsolete.
However, our analysis of several markets shows that technological evolution is much messier than this simple pattern. For instance, new technologies sometimes enter the market with better performance than the existing technology, only to fall behind at some point before later regaining the lead. That’s the case in the market for external lighting. When gas-discharge lighting, which is used in fluorescent tubes, was introduced around 1930, it was brighter per watt than the existing arc-discharge lighting, which is used in many street lamps, and it maintained that superiority for some 40 years, until improvements in arc-discharge lighting made it the brightest per watt again. Then, in 1980, gas discharge made its biggest jump in performance so far, again surpassing arc discharge in brightness per watt. Both technologies have gone through several long periods of stagnation followed by sharp improvements in performance.
When one technology is growing rapidly, it’s easy to get caught up in the hype and overinvest in it. However, the unpredictability and impermanence that we found in this and other markets suggests that companies should consider investing in, or at least monitoring, a portfolio of technologies, so they aren’t blindsided by a sudden improvement in one or another.
Consider the competition between ink-jet and laser technology in the printer market. When the two technologies were introduced in the mid-1980s, laser was far superior to ink-jet in resolution. Ink-jet quickly caught up, but didn’t surpass laser’s resolution. Then, in the mid-1990s, laser again took a significant lead. But ink-jet surpassed laser in resolution in 1997 and has maintained that edge. All the while, printer maker Hewlett-Packard Co. continued to sell both ink-jet and laser printers, putting itself in the best position to succeed in a shifting market

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For the full story, see:
GERARD J. TELLIS and ASHISH SOOD. “Innovation; How to Back the Right Technology; When trying to decide where to place their bets, companies often make three fundamental mistakes.” Wall Street Journal (Mon., DECEMBER 14, 2008): R8.

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