Strategic Options for Old-Technology Firms

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Disruptive Innovation > Best Practices > Strategic Options for Old-Technology Firms

Strategic Options for Old-Technology Firms
Don Smith
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.

Strategic Options in case of Disruptive Innovations
ernest agbenohevi, Consultant, Ghana, Member
It seems to me that NEW TECHNOLOGY FIRMS intending to reduce the cost of production and hence increase profitability and market sustainability need to also consider other factors such as environmental concerns of the new innovative methods, health concerns, improved resource use, job/employment generation, targeting potential consumers - those in the low income bracket and have low purchasing power.
TRADITIONAL FIRMS that employ old technologies need to do considerable market research to monitor the extent to which their operations are under threat due to the new technologies. Disruptive innovations may not necessarily be cost effective when compared to old technologies that may seem to be costly...

Strategic Options for Old-technology Firms
Lee Buan Heng, Manager, Singapore, Member
It seems we need to have strategic options to prevent disruptive innovations in financial product, it deemed not a technological concern, but had killed major economies.

Disruptive Technology?
Kirk C. Heriot, Professor, United States, Member
It would seem to me that this "theory" would be contingent on the strategy the firm is presently employing, using Miles and Snow's theory - defender, analyzer, prospector, etc. In effect, to what extent are they prepared to do any of the options suggested earlier.
Recent theory mentions Strategic Entrepreneurship as a view of the firm. Firms that do so try to balance their current competitive position using traditional strategic management models, while actively pursuing new opportunities (entrepreneurship).
I could see someone developing a 2x2 perspective of this theory. Of course, the challenge is to identify two dimensions that capture the essence of the scenario. For example, Christensen says there are really two types of disruptive technologies: those that create a new market and those that emphasize a low end of an existing market.
I do not necessarily agree that the second type is a disruptive technology. It sounds like a different use of an existing technology.

Strategic Options to Withstand the Technology Advancement
Thomas Shehu
Change is basic in human's life, likewise technology change is basic in the life of companies. The basic aim of any firm is to be stronger in order to meet the demand of its proprietors as well as its customers.
Therefore it is the duty of the business managers to work out modernity to meet up in terms of technology advancement. So many competent business organisations are always on research to find out ways of improving their business, hence advancement in technology.
Challenges and competition are good to improve the productivity of firms.

How Do You Know the New Tech Has Legs?
Jim Kaiser, Entrepreneur, United States, Member
Today there are many new technologies hitting the street - social media, cloud computing, etc. Does a litmus test exist for considering new technologies and whether represent a reasonable investment for a firm? The dialog above assumes that people should know it when they see it. No one is that good. What is a straightforward, reliable heuristic for judging?

Examples of Third Strategic Option
Julio Villafuerte, Student (MBA), Peru, Member
Do you have examples of companies that have applied the third strategic option recommended by Ron Adner and Daniel C. Snow?

Examples of Companies with Bold Retreat Strategy
Jaap de Jonge, Editor, Netherlands
Clearly you have to consider old technology companies to find examples of bold retreat strategies. The authors actually mention Linjett, Continental, StorageTek and Ultratech in their article as companies having been successful with this strategy.
Even more interesting is to think about what companies should have used this strategy but didn't and suffered badly as a result.

Special Interest Group Leader
Rick Mueller

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