Customer Power, Strategic Investment, and the Failure of Leading Firms

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Table of Contents

Introduction
Literature Review
Managing Technology and Innovation
Variables
Nature of Technology and its challenges
Issues in Implementing an Innovation
Recommendations
Summary
Conclusion
Reference List

Introduction

Technology is necessary in the current business management strategies. Any business that has not incorporated it in its framework is not equipped to compete. In fact, it has been a tool that has been adopted everywhere by organisations, schools, churches amongst many relevant bodies for their smooth running.

The current business environment that is characterised by intensive application of technology differs significantly from the past when things were done manually and for a long time. In the past, companies have instituted measures aimed at establishing themselves in the market.

Where this strategy has worked for some, other companies have ended up failing. One only wonders why some companies would succeed by using one aspect of technology while other companies fail. The secret however lies in the utilisation of the technological innovations adapted by an individual company, as well as how well it is able to integrate it in the system for efficiency and profitability.

Some technological innovations are expensive to acquire and maintain in companies. When not utilised appropriately, they can cause the downfall of the company or end up locking the much-needed capital. Some market leaders may adapt a technological change and end up losing their leadership status in the industry.

The observation has continued to amaze many people especially those in the field of management. Most of the organisations, which at one time led in the innovation of a product, have not been able to re-invent themselves in innovations that followed with most of them not being able to cope with the market changes.

In the computer industry, some companies were involved in developing the various defining systems in history. While these companies continued to dominate this field, other companies surpassed them in the innovation of one system thus changing the course of history. Some of the reasons behind the failure by these previously successful firms have been the managerial myopia or organisational lethargy, insufficient resources, or expertise (Bruton & White, 2011, p.23).

The failure of large organisations, companies, and institutions is due to the introduction of innovation dates in history. An example is the spinning of cotton, which is recorded to have failed at some point in history after the introduction of synthetic fibres in the industry. Most of the companies, which used to spin at this period in time and did not adapt properly to this change were out phased though this move was not because of lack of innovation.

The reasons behind the failure of some of these organisations can be traced to other factors, which are not necessarily related to the new technologies introduced at the time. Now, all companies operating anywhere in the world have a degree of technological innovation in their ranks. Most of them are using out-dated technologies. Lack of exposure, resistance to change, or ignorance may be some of the reasons why such companies are holding to the past when new and convenient technologies are in place ready for use.

Small-scale companies use technology in acquisition of products, marketing, management, and the sale of their products to the customers. This strategy does not mean that the companies are not successful, as evidenced by the degree of success enjoyed by small-scale companies. Those that have struggled to succeed by introducing innovations have in some instances failed to do so thus ruling out technology as a cause of their failure.

A question emerges therefore as to the causes of failure of previously successful organisations after the introduction of technological innovations in their operations. This essay discusses the reasons behind the failure of formerly competitive companies in many industries after the introduction of changes in technological innovation.

Literature Review

Organisational changes are described as a necessity that is described as paving way for profitability, efficiency, and better performance in any company. One of the changes that companies have struggled with over the past is the change in technology. In the contemporary business environment, a company has to make the right changes in technological innovation to remain relevant in its industry.

History has shown that those organisations that do not adapt appropriately to changes in innovation have ended up vanishing or struggling to maintain profitability. Changes in technology are thought to lead to new products, organisational approaches, and in turn new customers (Bruton, & White, 2011, p.23).

Any of the changes to be implemented in an organisation, including those dealing with technological innovations, require a certain amount of financial input from the company. This means that the money may not go to projects that are more important to the company. These projects may have been more important to the company than the perceived change.

Some researchers have suggested that the cause of market decline in some of these companies is due to the denial of necessary products to the existing customers while aiming to attract new customers with new products (Bruton, & White, 2011, p.18). Market leaders in the organisational categories are responsible for most of the introduced innovations in their category. When these changes do not address the needs of their current customers, the companies tend to lag behind other companies in the market.

In establishing the causes of organisational failure in relation to the introduction of technological innovations, it is important to understand the criteria used to allocate resources to technological innovations in the organisations. Researchers have analysed these factors in the past. Two distinct lines of thought exist (Bruton, & White, 2011, p.20).

The first one was suggested by Pfeffer and Salancik (1978, p.34) who used explanations outside the organisations to explain the pattern of resource allocation for activities involving innovation. They called the pattern resource dependence. They used the explanation to explain that companies usually depend on the allocations and resources they get without influencing decision making on innovations.

The discretion that is traditionally reserved for the organisation managers is not available in this option. The organisations decision-making is dependent on external forces. The external forces directing the allocation of resources in the organisations include customers and investors in the organisation, as these are the people who are thought to offer the needed resources for organisational survival (Pfeffer & Salancik, 1978, p.34).

Several technological innovations in the major organisations (Pfeffer, & Salancik, 1978, p.34) have supported this line of thought in the past. In the organisations studied, the development of technological innovations was necessitated by the emergence of other technologies perceived to be a threat to the organisation in general (Pfeffer, & Salancik, 1978, p.34). Bower (1970, p. 38) came up with the other line of thought, which opposed the resource dependence line of thought.

Over the centuries, this line has been studied and altered to adapt to the changes in technologies. In this proposal, it is suggested that most of the changes in technological innovation in organisations are influenced by factors internal to the organisation (Bower, 1970, p. 38). As Bower observed, managers in an organisation hold the key to decision making regarding technological innovations in organisations where this policy exists (Bower, 1970, p. 38).

The managers involved in the decision-making as regards to technological innovations are those in the middle levels of organisational management. They choose whether to share the innovation with their counterparts or keep it. It is also observed that one of the factors affecting this type of organisational innovation is the compromise of risk and career management (Bower, 1970, p. 37).

Managers who are in the lower ranks are likely to support innovations they perceive as being acceptable to the customers and therefore more likely to succeed. They do this at the expense of other innovative changes that they may be thinking of as a way of preventing any risk for their careers.

Both lines of thought are important in understanding the determinants of technological innovations adopted by a particular organisation. It is from the demand of the customers that technological innovations emerge in organisations.

However, if the innovations are not structured to meet the needs of most of the customers to the organisation, the organisation ends up wasting valuable resources besides losing the grip of the market. Organisations, which adopt innovations only to address the needs of few customers who are remote and in emerging markets, find it difficult to cope with market competition.

Another explanation that has been forthcoming as to why leading companies fail in technological innovations includes competition from emerging companies (Bower, 1970, p. 46). Most of the technological innovations that have been observed are mainly from new companies. The existing ones have the financial and market advantage. However, they fail to compete thus only continuing to invest in traditional technologies.

It is observed that where innovations are introduced in the market by new companies, entrants have an advantage over the existing organisations, as they enjoy the attackers advantage over the incumbent companies (Bower, 1970, p. 38).

The causes of the failure for the companies with the entry of innovation can also be explained based on the destruction of technological innovations existing in these companies when new technologies are introduced (Bower, 1970, p. 38). An organisation may be well adapted to using a certain kind of technological innovation in its operations.

With the entry of newer technological innovations, the old ones are discarded. There develops a difficulty in adapting to the new change. The valuable loss in time and resource in the process costs the organisation valuable market share. The new technology adapted may not be better than the existing technological innovation. It may also not serve as expected for the organisation hence qualifying as another reason for organisational failure with the introduction of new technological innovations.

Most of the firms operating in various sectors of the economy are using innovations that were in the industry for a period of five or more years because, based on the above discussions on the causes of organisational failure after technological innovation, most of the organisations are now exercising caution in their approach to technological innovation (Christensen, 1997, p. 45).

With the advent of globalisation however, companies are competing through technological innovation with those winning ending up earning a greater market share.

The causes of failure in organisations can therefore be explained in a number of ways depending on the researcher and the industry in which the research was done. In the field of information and technology, the success of a company is dependent on the degree to which it embraces technological innovations. An organisations philosophy and culture may lead to its downfall even with the introduction of innovative technologies (Christensen, 1997, p. 45).

Some researchers and business managers have suggested that some organisations focus so much on the needs of their current customers and end up overlooking their other needs in the industry (Utterback, 1995, p.138). Overhead costs in an organisation may also be as high as to limit the adoption of new technological innovations. This situation denies them of profits and revenues.

Smaller competitors who are not focused on the needs of their small number of clients are, therefore, likely to adopt new strategies in technological innovation thus ending up leap-frogging their larger competitors in the industry.

The other group of organisations, which may enjoy success in technological innovations, is the outsider industries (Utterback, 1995, p.138). These organisations have little to lose in pursuing radical innovations&They have no infrastructure of existing technology to defend or maintain (Utterback, 1995, p.38). They therefore end up competing with the existing large organisations.

The reasons that the existing organisations are unable to compete adequately with these companies are because they have huge investments in the current technology&emotionally, they and their fortunes are heavily bound up in the status quo&From a practical point of view, their managerial attention is encumbered by the system they have (Utterback, 1995, p.139).

Some of the organisations, which have ended up being surpassed in history due to their policy on innovation, include Bell Labs and the inventor of the Radio technology (Utterback, 1995, p.140). Bell Labs did not see it necessary to have a patent for its laser use in telecommunications. Other companies used the technology combined with fibre optics to make a very powerful combination (Utterback, 1995, p.141).

Marconis invention of the radio was also followed by the use of this technology by other organisations. This move has led to the development of one of the strongest media tools (Christensen, 1997, p. 46). The managers and organisations involved in the above innovations may have approached the industry differently. However, their miscalculations led to other organisations surpassing them in the same technological innovations.

Previous research findings have categorised technological innovations as being sustaining or disruptive to the existing capabilities of the industry players (Christensen, 1997, p. 46). Innovations, which are destructive to competence, are mainly from outsiders in the industry while competence-enhancing innovations may come from existing players in the industry as well as outsiders (Christensen, 1997, p. 46).

Sustaining technologies are also described as concentrating on the needs of the current customers in an organisation, and are geared towards improving the parameters (Utterback, 1995, p.138).

On the other hand, disruptive technologies bring a value proposition different from that provided by the existing technologies (Christensen, 1997, p. 47). Products developed because of destructive technologies are typically inferior in terms of performance, but are often cheaper, simpler, smaller, and frequently more user friendly (Christensen, 1997, p. 46).

Managing Technology and Innovation

As noted above, technological innovation can be a cause of success or failure of a company or an industry. It is therefore important to know how to manage this technology for the benefit of the organisation. One of the causes of failure discussed is the uncertainty that technological innovations introduce to an organisation. Some authors reveal a period of suspense that exists between technical feasibility and commercial viability (Bower, 1970, p. 38).

Some companies rush into innovations and end up burning while others watch as new companies adapt the innovations, which drive them out of business. Whether it is a product innovation or process innovation, companies should not take a very cautious approach. However, a well-calculated decision-making should be the way to go for them.

One of the services that have been affected by technological innovations includes that in the health industry, which has been the beneficiary of the digital transformation that has taken place over the past decade (Bower, 1970, p. 47). The challenge with technological innovations in the health sector is the availability to the general population. For most of the innovations, which have been adapted in the health industry, the bulk of consumers are unable to afford them because they are expensive.

The delivery of these innovations in the industry has been in a disorganised and chaotic manner that defies the very purpose of the innovation at times (Bower, 1970, p. 48). The innovations have also been adopted by the payer with the health providers and the patients taking a back seat in adopting them (Utterback, 1995, p.138).

Management of these innovations in the health sector requires the involvement of all parties concerned with the industry. The first step that could prove to involve all the key players including the providers and the patients is the adoption of cost effective technologies. The health industry needs to adopt those innovations that are cheap for the consumers and are easily applicable to the providers.

The next thing in the management is adopting technologies with which patients and providers can relate to and apply directly in their practice. Should the technological innovations be too complex for consumers, consumer knowledge may be enhanced by carrying out empowerment and training.

Another example in the management of technological innovations is in the digital imaging industry. The introduction of digital imaging in the 1980s caused uncertainty in the film industry, as organisations were not sure of the impact that the Digital Still Camera would bring to the industry (Utterback, 1995, p.138).

The argument was based on the perceived low quality that this innovation would introduce in the industry. However, with time, there was the emergence of a digital design that was incorporated into the conventional film designs thus leading to the development of better film quality.

Digital imaging technology has led to the destruction of the conventional photographic technology. However, with adequate management, there has been the creation of opportunities that were not available in its era. This exposition shows that, with effective management of new technological innovations, organisations should be able to re-invent themselves and adapt to the changes.

Management is therefore the main difference between organisations, which experience disruptive or sustaining effects from innovations. It is therefore important that organisations are able to manage new technological innovations for their benefit.

Variables

There are a number of variables used in the internal or external innovation in organisations. One of the variables is the result of a market analysis or a study by the organisation on the trends in their market (Bower, 1970, p. 38). One of the driving factors for innovation is the influence from market trends.

Almost all organisations have an elaborate sales and marketing team that monitors changes in these trends. The consumer is the priority for many organisations. Should they adopt a new trend, the organisation is in most instances compelled to change with them. The feedback from consumers is used to effect these technological changes in organisations.

Another variable that is used in determining technological innovation in organisations is competition. Organisations are frequently conducting studies to determine their competitive advantages and positions in the market. When they establish that their competitors have an edge over them, some of the changes that are adopted include the adoption of technological innovations.

An example is the car manufacturing industry where organisations are frequently developing new models to remain viable in the industry. This variable is significant in any industry. In fact, it is one of the strongest driving forces in technological innovation.

A variable that is internal to the organisation and leading to the creation and adoption of new technologies is the result of creative thinking. Based on the competitiveness of the personnel in an organisation, new technologies may be driven by their creative thinking. This situation has been observed mainly in the information technology industry where technological innovations are changing every single day. To manage these variables, an organisation needs to appreciate and encourage the development of ideas within its ranks.

Nature of Technology and its challenges

Some of the challenges that technological innovations face include indifference of the employees, isolation, and hostility (Utterback, 1995, p.138). Most of the management teams regard innovation as a necessary process for their companies, but some of them just say it for communication without believing or meaning it. They therefore end up doing little beyond speaking when it comes to innovation. As much as people may consider this case attributable to the managers personality, studies have found management to be involving.

For most of them, they transform from management to leadership, which is challenging for them. The adoption and success of technological innovations in an organisation is however dependent on the mind frame of the managers concerned. If they do not believe in these innovations, therefore, the organisations end up adopting this stand. This direction may be costly to the organisation as those that take a different stand on the same innovations may surpass it.

To deal with this problem, organisations need to have a detailed policy on innovation with the decision being made by a number of managers. There is also a need for a frequent review of an organisations management status with managers being encouraged to adopt innovative thinking.

The organisation also needs to select managers with a history of involvement in technological innovations. For an organisation to eradicate and effectively deal with this problem, there is a need to have a department dealing with the adoption of technological innovation.

Managers may also fail to adopt technological innovations based on their hostility to the innovations. Some of the reasons cited by the managers to stop the adoption of innovations include budgetary constraints, organisations regulations, and limited resources. Isolation is also a common cause of failure to adopt technological innovation, as one manager cannot effectively institute the innovation changes.

The inception of innovation in technology in an organisation is a team effort that requires participation of all members of the organisation. This effort will help to solve the problem of isolation in reference to the adoption of new technological innovations.

Other challenges associated with technology in organisations include the slow process of adoption and acclimatisation. With the introduction of new technologies, employees in an organisation may find it hard to adapt the change. This case may cost the organisation. This challenge can be eliminated through adequate training of the personnel before the adoption of the innovations, slow and stepwise adoption of the changes, and the introduction of a board to facilitate and oversee the transition.

Another problem that is associated with technology is the cost associated with changes. In many times when making innovative changes, companies are often faced with financial challenges, which are in the acquisition or development of the technological innovation, placement and adoption into the organisation, and effective running.

This challenge may also be dealt with through adequate preparation and planning, and the adoption of those innovations that are cost effective. As noted earlier, one of the challenges of technology is the destruction that it may bring to an organisation. This may however, be dealt with by a careful planning and adoption of only relevant technological innovations.

For most of the organisations that have adopted destructive technologies, the decision was ill informed: it was reached at a rate that was too fast for the organisation leading to its eventual burning. Technology does not always lead to the fall of major organisations. Those that carefully adopt may end up succeeding.

Issues in Implementing an Innovation

Managers should be ready to deal with the issues that are likely to develop with the implementation of technological innovations. One of the issues likely to develop includes how to deal with the success that the innovation may bring. When the management is not able to anticipate success of a technological innovation, the duration of this success may be limited. The organisation may find it hard to survive in the same market. The management therefore needs to plan for any outcomes of technological innovations to ensure continued success.

Another issue that the management should address is the competence of the people entrusted with the implementation of the technological innovation in an organisation. Some managers are not as competent in relation to some of the employees below them in handling technological changes. Competing interests may therefore develop. The management therefore needs to institute measures to ensure that this competition does not happen.

One of the measures is to have a team involved in the smooth transition of the technological innovation. Before the organisations can adopt any technological innovations in their practice, it is important to study the effect of the same innovations on other companies in the market. This attempt will help them establish whether adopting the technologies will lead to success or destruction of the organisations.

Another issue associated with technological innovation in organisations is the development of sustaining the new technology. Often, firms have experienced problems in maintaining a working innovation in their companies due to a number of reasons. One of them is the rapid change in technology in a way that the organisation is not able to keep up. With each innovation, the trend may be over before an organisation fully adapts to it. With this situation, the organisation runs out of business before the changes made become fully utilised.

Another issue with technology is getting the market to adopt it once implemented in an organisation. A company may engineer a good product that may be useful to many customers. However, with the indifference that the customers demonstrate, depending on the industry, they take long to adapt it.

This case leads to the organisation losing ground and thus failing to be impressive. The management can deal with these problems by instituting a framework for adequate feedback. Customers should be allowed to give their suggestions on the innovations, which should then be implemented in the policy of the organisation.

The management may also introduce technology to a market and then do vigorous marketing, which will contribute towards consumer awareness. An organisation, which intends to introduce an innovation in the market, should therefore have well-oiled marketing machinery in place before it does so.

These are not all the issues associated with technology. With adoption of the same in organisations, the personnel may not be well prepared thus leading to a reduction in the intended efficiency. This case can be avoided by adequate preparation of the organisations personnel, adopting the technology in phases, and training them after the adoption.

With the development of new technological innovations, most organisations have often adopted them fully besides discarding the existing ones. Although this move may increase the efficiency of the organisations processes or improve the quality of the output, the consumers of the new product may not be as many in relation to those of the previous product. This case may cause the downfall of the organisation.

Recommendations

For organisations to stay relevant, they have to adopt technological innovations, which are beneficial both to them and to their customers. Managers need to keep in touch with technological changes in the industry. This strategy will help their organisations to maintain profitability. Disruptive technologies are hard to pre-empt in an industry. Managers need to study them in retrospect (Pfeffer, & Salancik, 1978, p.34). The products causing the destruction from new firms should be studied with recommendations being made.

Organisations should also have small empowered teams to dabble in new technologies by encouraging them to come to the market quickly in a bid to keep making performance improvements as feedback from customers pours in (Utterback, 1995, p.138). Before realising this outcome, organisations need to have a working system through which they can get feedback from their customers for use in making new technological changes.

Another method that successful organisations can adopt is building a strong management team that is aware of the challenges associated with technological innovations. This move will make the implementation of any technological innovations to be adopted smooth. Regular training of the personnel involved in the organisations is also necessary, as it will ensure that they keep in touch with the changes.

Summary

Most of the literature reviewed suggests that technological innovations have been responsible for the failure of many large organisations in the past. The reasons behind the observed failure to address the needs of the immediate customers include resource allocation. Resource allocation for technological innovations is affected by a variety of factors with researchers categorising them into external resource dependence and the internal factors affecting resource allocation.

Technological innovations have also been categorised into two based on their effect on the existing capabilities in an organisation. They can therefore be disruptive or sustaining the existing capabilities.

An organisation needs to have a properly laid plan on how to deal with technological innovations including the training of managers, analysis of customer feedback, and performing an effective analysis. Technology can cause many changes in an organisation. The management therefore needs to be adequately prepared to deal with them. Destructive technologies are hard to monitor. Organisations should pre-empt and prevent their negative effects.

Conclusion

In conclusion, technological innovations are necessary for the success of organisations. In the past however, successful organisations have ended up failing with the introduction of these technologies. Some of the causes of this failure include the development of weak policies and implementation structures. However, most of the causes of organisational failure after the introduction of new technological innovations are external to the organisation and hence hard to predict and control.

Entrants into an industry are better equipped to adopt technological innovations compared to existing firms because of the security they experience. They do not have old technologies to guard or complex processes. They therefore find it easy to put in place and use innovations compared to their counterparts in the industry. This challenge can be dealt with if managers in successful organisations adopt a policy that facilitates transition to innovations.

Reference List

Bower, J. (1970). Managing the Resource Allocation Process. Irwin: Homewood, IL.

Bruton, G., & White, M. (2011). Strategic Management of Technology and Innovation. South-Western: Cengage Learning.

Christensen, C. (1997). The Innovators Dilemma. Boston: Harvard Business School Press.

Pfeffer, J., & Salancik, G. (1978). The External Control of Organisations: A Resource Dependence Perspective. New York: Harper & Row.

Utterback, J. (1995). Developing technologies: The Eastman Kodak Story. The McKinsey Quarterly, 1(1), 130-143.

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