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Recent empirical studies have convincingly demonstrated a consistent, albeit disturbing, pattern of results with respect to the management of innovation. In almost every industry studied, a set of leading firms faced with a period of discontinuous change fails to maintain its industry's market leadership in the new technological era. Tushman and O'Reilly nicely summarize this point in their research (1). They describe how W. E. Deming, probably the individual most responsible for jumpstarting today's quality revolution, highlighted this recurring theme in a long list of diverse industries, including watches, automobiles, cameras, stereo equipment, radial tires, hand tools, machine tools, optical equipment, airlines, and color televisions. What Deming was trying to point out was that in each of these industries the most admired and most established firms rapidly lost their coveted market positions. It is indeed ironic that so many of the most dramatically successful organizations become so prone to failure. This pathological trend, described by many as the tyranny of success--in which winners often become losers and firms lose their innovative edge--has been a worldwide dilemma, exemplified by the recent struggles of firms such as Xerox in the U.S., Michelin in France, Philips in Holland, Siemens in Germany, and Nissan in Japan. It seems that the very factors that lead to a firm's success can also play a significant role in its demise. The leadership, vision, strategic focus, valued competencies, structures, policies, rewards, and corporate culture that were all so critical in building the company's growth and competitive advantage during one period can become its Achilles heel as technological and market conditions change over time. This pattern was highlighted in a notable 1963 public presentation by Thomas J. Watson, Jr., IBM's chairman and CEO. According to Watson: Successful organizations face considerable difficulty in maintaining their strength and might. Of the 25 largest companies in 1900, only two have remained in that select company. The rest have failed, been merged out of existence, or simply fallen in size. Figures like these help to remind us that corporations are expendable and that success--at best--is an impermanent achievement which can always slip out of hand. Sustaining and Disruptive Innovations It is important to recognize, however, that this pattern of success followed by failure--of innovation followed by inertia and complacency--is not deterministic. It does not have to happen! Success need not be paralyzing. To overcome this tendency, especially in today's rapidly changing world, organizations more than ever before are faced with the apparently conflicting challenges of dualism, that is, functioning efficiently today to sustain the success of their business models while also incorporating the disruptive innovations that will enable them to be competitive in the future (2). Not only must business organizations be concerned with the financial success and market penetration of their current mix of products and services, but they must also focus on their long-term capabilities to develop or commercialize what will emerge as the most customer-valued technical advancements into future offerings in a quick, timely and responsive manner. Corporations today, no matter how they are structured and organized, must find ways to internalize and manage both sets of concerns simultaneously. In essence, they must simultaneously build internally contradictory and inconsistent structures, competencies and cultures: fostering more efficient and reliable processes while encouraging the experiments and explorations needed to re-create the future. The challenge is that such innovative activities are all too often seen by those running the organization as a threat to its current priorities, practices and basis of success. While it is easy to say that organizations should internalize both sustaining and disruptive innovations in order to transform themselves, it is a very difficult thing to do. …
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