The incumbent's advantage

This paper synthesizes a broad base of research performed across a broad variety of industrial sectors over the last ten years to show that the capability to integrate new technology with existing firm assets and capabilities is crucial to performance during periods of rapid technological change. In doing so, it challenges some accepted work on the management of innovation that argues for organizational separation in times of discontinuous technological change. The evidence includes extensive field-work performed at more than 200 companies in several different sectors of the computer industry: these included semiconductors, computer processor systems, computer systems (workstations and servers), internet software platforms, and electronic commerce applications. Over all, our analysis shows that organizations that mounted integrated responses to technological change obtained critical advantages in the productivity of their organizations, in the quality and performance of their products, and in their ability toachieve strong, sustained responses to market and technology changes. The paper goes on to discuss the implications of these findings, and describes several structures and approaches for organizing integrated responses to technological change. These approaches are then described in some detail through some case studies drawn from a variety of companies including Walgreens, Cisco Systems, Merrill Lynch, and Charles Schwab. Rather than by passing traditional structures through independent ventures, these organizations effectively "used" technological and market threats to force the adaptation of their existing organizations, leveraging deep rooted capabilities while mastering the dynamics of profoundly different business environments.