Why big brands get stuck in the comfort zone
The Financial Times article by Tim Harford lays out a number of cases where successful companies had failed to take advantage of or respond to disruption. After dismissing the belief that idiocy was at fault (tempting though it may be), Harford focuses in on why these companies failed to make the necessary changes. He quotes Joshua Gans, an economist at the Rotman School of Management in Toronto and author of 'The Disruption Dilemma', as follows,
"Disruption describes what happens when firms fail because they keep making the kinds of choices that made them successful."
Gans believes that incumbents often realize the implications of new technology, they are simply unable to adjust their organization to leverage it successfully. Kodak, Blockbuster, and Nokia were all stuck in the comfort zone where it was easier to do more of the same than do something different.
- Kodak did not fail to recognize the potential of digital photography, it invented it. The company invested billions on a range of digital cameras but first over-engineered them and then failed to recognize that sharing was the new consumer need, not printing.
- Blockbuster's CEO John Antioco recognized the threat posed by Netflix and was willing to forego $200 million is late fees and invest another $200 million to launch Blockbuster Online. Others were not. Antioco was ousted, his changes reversed, and 5 years later Blockbuster was bankrupt.
- Nokia led the mobile phone revolution and launched the world's first smartphone but still lost out to Apple, Samsung, and Google because it did not respond to the shift from products to ecosystems. Talking about Nokia's failure Yves L. Doz, of INSEAD concludes,
"Nokia's mobile phone story exemplifies a common trait we see in mature, successful companies: Success breeds conservatism and hubris which, over time, results in a decline of the strategy processes leading to poor strategic decisions. Where once companies embraced new ideas and experimentation to spur growth, with success they become risk averse and less innovative."
"developed or assembled most of the features of a user-friendly personal computer, but Xerox itself did not have the organizational architecture to manufacture and market it. Xerox Parc did develop the laser printer, a product that matched the company's expertise nicely."
For that matter, you could argue that the advent of digital, social, and mobile technology has disrupted marketing, and most companies are still trying to change their organizational structure to cope with it. But what do you think? Please share your thoughts.
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