09 August 2009

Selective Innovation ~ Profitable Incrementalism

HBS colleague Mary Tripsas writes in the NYTimes about Staving Off a Spiral Toward Oblivion...
"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."
She gives the examples of Sony's Mavica camera versus Kodachrome as a case where Kodak made money on "old" film for nearly three additional decades following the introduction of "new" digital.
"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."
Here she gives the example phototypesetting from the publishing industry. But how to avoid repeating the investment overkill of building the last, largest sailing ship in the era of steamships?
"Selective, intelligent innovation in the old may just hold the key to the future."

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