established business vs. innovation

Jeff Bone jbone@jump.net
Wed, 09 Jan 2002 13:23:54 -0600


Luis Villa wrote:

> FWIW, if anyone is interested in doing some formal reading, Clay
> Christensen (of the Harvard Business School) wrote 'The Innovator's
> Dilemma' about exactly this- the tendency of innovation being a risk and
> not a benefit for established businesses.

Yup, this is an excellent treatment of the subject.  I have no contest with
the notion that established players view innovation as a risk.  However,
it's important to recognize that this is true for the established player
*irregardless* of whether you are discussing internal or external
innovation.  For external innovation that promises to be disruptive, a
response of some kind is fiduciarily required.

Hence the available strategies for such a response:  DISCREDIT / COPY /
BUY.  COPY is not equivalent to innovate, and becomes an attractive option
if (a) DISCREDIT is unlikely to sustainably succeed, and (b) the cost of
COPYing is less than the cost of BUYing.  My problem with transparency stems
from the observation that the cost of COPYing drops dramatically in
transparentland, and hence the possibility of a beneficial BUY outcome for
the innovator diminishes accordingly.

It's easy to see this behavior, particularly in the technology industry.
Cisco and Microsoft are two good examples, validating that in certain
circumstances established players employ both COPY and BUY.  Look at, for
instance, the context of the Cisco acquisition of Netspeed.  First they
threatened COPY, then when Netspeed's patent protection made it clear that
COPY was too risky, they went to BUY.  The essential COPY example should be
obvious:  Microsoft v. Netscape.  (DISCREDIT should be entirely obvious /
noncontroversial.)

jb