Mature companies often lack the vision and resolve to fully commit to new technologies — even when consumers are ready for them. This leads companies to develop watered-down products with limited capabilities and leaves them exposed to upstart competitors.

Technological transitions are challenging, particularly for companies in mature industries. Incumbents are frequently blindsided by new technologies, fully missing opportunities to enter emerging markets early. While some established companies do possess the awareness and dexterity to become early adopters of new technologies, they typically lack the vision and the commitment to become leaders. Too often, they cling to the familiar, developing hybrid products that combine elements of the old and the new. The trouble is, hybrid strategies put even the best incumbent companies in a weak position when the market finally embraces the new technology. We call this the “hybrid trap.”

The transition from internal combustion engines to electric vehicles (EVs) demonstrates the dangers of hesitating to embrace the new. Several internal combustion engine makers, such as General Motors Co., and Honda Motor Co. Ltd., entered the EV market early, but they backed away from these projects in favor of continued emphasis on established technology. Gradually, most of the automakers focused on hybrid cars that combined old and new technologies. This opened the door to new competitors that pursued solely the EV technology, most notably Tesla Inc. It wasn’t until established players saw the market’s interest in Tesla that they began to question their hybrid strategies and realized that electric cars had the potential for broad market appeal. By mid-2017, nearly every old-line engine producer was playing catchup on EV technology, working to release new electric models in the next two to five years.

Meanwhile, Tesla, having established a strong brand in EV, continues its move down market as a more direct threat to incumbent automakers.

Tesla’s first mass-market car, the Model 3, was announced in March 2016, and by summer 2017, it had a waiting list of more than 455,000 units. Although it is too early to know if Tesla will be successful in the long run, its clear leadership in EVs has exposed a fundamental weakness in the approach incumbents commonly take when faced with industry transformations, with lessons that apply to other industries that face similar transitions.

Conviction vs. Opportunism

New markets are often enabled by technological change and exploited by minds that can envision futures that are far different from the status quo. More so, they are convinced that such a future must happen. Amazon.com Inc.

References

1. M. Chafkin, “A Broken Place: The Spectacular Failure of the Startup That Was Going to Change the World,” July 4, 2014, www.fastcompany.com.

2. J. Davis, “How Elon Musk Turned Tesla Into the Car Company of the Future,” Sept. 27, 2010, www.wired.com.

3. K. Naughton, “Bob Lutz: The Man Who Revived the Electric Car,” Dec. 22, 2007, www.newsweek.com.

4. T. Friend, “Plugged In: Can Elon Musk Lead the Way to an Electric-Car Future?” Aug. 24, 2009, www.newyorker.com.

5. G.R. White, “Management Criteria for Effective Innovation,” Technology Review 80, no. 4 (1978): 14-22.

6. C. Mui, “How Kodak Failed,” Jan. 18, 2012, www.forbes.com.

7. K. Kokalitcheva, “Ex-Blackberry CEO Admits Why Its Most Important Device Failed,” June 10, 2015, www.fortune.com.

8. L. Josephs, “Long Before the Combustion Engine, the Hybrid Car Is Facing Obsolescence,” July 14, 2017, www.qz.com.

9. White, “Management Criteria for Effective Innovation.”

10. Ibid.

11. N. Tajitsu, O. Tsukimori, and S. Navaratnam, “Toyota Eyes Mass EV Output in China as Early as 2019: Report,” July 22, 2017, www.reuters.com.

12. D.J. Teece, “Profiting From Technological Innovation: Implications From Integration, Collaboration, Licensing and Public Policy,” Research Policy 15, no. 6 (1986): 285-305.

13. M.J. Martin, “Managing Technological Innovation and Entrepreneurship,” (Reston Publishing Co., 1984).

14. Lanny Hartmann, “2017 Update: Geographic Distribution of DC Fast Chargers,” Sept. 12, 2017, http://pluginsites.org.

15. D. Herron, “Range Confidence: Charge Fast, Drive Far, With Your Electric Car,” 2015, www.greentransportation.info.

16. N.R. Furr and D.C. Snow, “Intergenerational Hybrids: Spillbacks, Spillforwards, and Adapting to Technology Discontinuities,” Organization Science 26, no. 2 (2014): 475-493.

1 Comment On: The Hybrid Trap: Why Most Efforts to Bridge Old and New Technology Miss the Mark

  • David Teich | March 19, 2018

    This is nothing new. For a view of one of the earliest examples in tech, go read “Fumbling the Future” by Smith and Alexander.

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