Surviving Disruptive Technologies
Research by Henry Lucas
Companies must make an early move to either adopt a new business model, or morph
the existing model to take advantage of the disruptive innovation.
"Innovators applying information technology did not set out to bankrupt
Blockbuster and Borders, destroy Kodak’s film business, demolish the market
share of the New York Stock Exchange, or sink the U.S. Postal Service, but all
of these things have happened." This passage opens Smith School Professor Hank
The Search For Survival: Lessons from Disruptive Technologies.
While innovation has disrupted dominant systems through history, the fall of
Blockbuster and Borders illustrates the more recent effect of information technology,
which has turned innovation into a powerful disruptive force
Henry C. Lucas, Smith Professor of Information Systems, addresses how and why
this phenomenon threatens the survival of many companies today. His new book presents
a model of survival to guide managers in responding to potentially disruptive technologies.
It presents numerous examples of firms that have not been able to respond successfully
to innovators that have disrupted their businesses.
A company’s survival depends on an early move to either adopt an entirely new
business model or morph the existing model to take advantage of the disruptive innovation.
The latter option, said Lucas, is more feasible and has been the approach of the
Kodak is a highly visible example -- disrupted by the commercialization of digital
photography – it has faltered and recently filed for bankruptcy under such pressure.
Lucas devoted a chapter to the latter in his latest book. “I've followed Kodak for
5-6 years, studying their annual reports and collecting analyst stories about the
company,” he said. In the process, he collaborated with Maryland Public Television
for a 2008 documentary, The Transformation Age, which aired on about 200 public
For the new project, Lucas studied companies and industries that are having trouble
responding to disruptive technologies along with survivors like Apple and Verizon.
He addresses looming disruption in such areas as cloud computing, PC tablet production,
television and movies (with the advance of online video content via Hulu, YouTube
and Facebook) and the GPS industry where cell/smart phone manufacturers have found
it inexpensive to include GPS capabilities. With consumers starting to abandon the
fixed GPS devices, sales are dropping for the likes of Magellan, TomTom and Garmin.
Such industry players could learn well from IBM and Kodak -- both initially hampered
by insular cultures and resistance to change. “The stakeholders assumed their firms’
longstanding success made them unsinkable,” Lucas said.
Kodak stayed loyal too long to its outmoded business model. With 100-plus years
of success, a market share that at times exceeded 90 percent and a rigid bureaucratic
structure, the company wanted to protect its cash cow film business as long as possible,
Lucas said. But the market flood of digital cameras, combined with the Internet,
changed how consumers capture and share images. Kodak’s slow response to this disruptive
technology cost it dearly. The workforce shrank from 145,000 in the 1980s to around
19,000 at the time of its January 2012 bankruptcy filing.
IBM perhaps unwittingly saved itself by turning to an industry outsider, Lou
Gerstner. Previously head of RJR Nabisco, Gerstner took command in 1993, as IBM’s
board of directors was contemplating a plan to carve up the financially struggling
firm into five smaller companies. “Unfettered with no history inside the company
or technology-industry experience, Gerstner looked at the plan and said ‘I am a
lifelong IBM customer and do not want to deal with five IBMs,’” Lucas said. “So
he developed a strategy based on providing a one-stop solution, recognizing that
customers didn’t care whether they have an IBM problem or an AT&T problem. They
simply want business solutions. Now the company profits more from services and consulting
than from its software and hardware divisions.”
Ultimately, executing the change takes extraordinary courage. It may mean changing
the company power structure and taking stakeholders from a comfort zone into unchartered
territory, said Lucas. "These are very difficult, but necessary, decisions."
Published by Praeger, The Search For Survival: Lessons from Disruptive Technologies
will be available from booksellers in June.
Tips from The Search for Survival
- Understand your business. Kodak thought it was in the business of “taking pictures”
rather than “capturing and sharing images.”
- Prioritize assessing future technologies, even if it means going outside to a
- When facing technology disruption, look to establish a new market position. Quickly
abandon an existing business model whose days are numbered and move on.
- Determine whether you have the resources and expertise to deal with the disruption
in-house. Explore options for merging with a new venture if it threatens your business.
- Beware of internal resistance to change and strategize to proactively overcome