Strategic Options for Old-Technology Firms
What should be the
strategic response of old-technology firms when a promising new technology shows up? Typically firms respond by either
1.
Fighting the new technology, or
2.
Trying to make a transition to the new technology.
Ron Adner and Daniel C. Snow recommend a third strategic option in their article worth reading "Bold Retreat - A New Strategy for Old Technologies" in the Harvard Business Review of March 2010:
3.
Bold retreat. Proactively give most of the established market to the new technology and instead pursue either a:
3a. Retrenchment to a niche of the traditional market (where the old technology has some advantage over the new technology), and/or
3b. Relocation to a new market (where the old technology has some advantage over the new technology).
Main advantages of a bold retreat strategy are that it may allow the firm to continue to make money on a smaller scale. This may give it a later option to invest in another growth opportunity.
Drawbacks are the need for a significant organizational change process and a tough communication job to explain this strategy to current stakeholders.
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