6 Incumbent firms face organizational obstacles to changing their core

6 incumbent firms face organizational obstacles to

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6. Incumbent firms face organizational obstacles to changing their core technologies: When a new technology comes along, organizations often have to change their structures to fit the new technology. This causes fighting within the organization because some managers have to lose political power and influence. These managers resist the changes, even if they are necessary for the organization to survive. For example, Polaroid failed in its efforts to exploit the shift to digital camera technology because its managers resisted making the people in charge of electronic digital signal processing, software, and storage technologies more central to the organization than the people in charge of optics and film technology. download instant at 15
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download instant at 5. Are some types of innovation better and worse for entrepreneurs founding new firms? If so, why? If not, why not? The Abernathy-Utterback model provides insight into when new and established firms are most successful in technology-intensive industries. In general, the fluid phase of an industry is the most favorable to new firms, while the specific phase is most favorable to incumbent firms. Several factors account for this pattern. 1. Before the establishment of a dominant design, new firms can operate without adopting the same product design as more experienced firms. However, once a dominant design has been adopted, new firms must adhere to the standard product design in the industry. Because established firms have greater experience working with this design than new firms do, new firms are disadvantaged when all firms have to use the same product designs. 2. Before the establishment of a dominant design, firms operate on a small scale to minimize technical uncertainty. Moreover, they tend to have non- hierarchical organization structures because these structures facilitate product design and development. However, once a dominant design has been established in the industry, the production process becomes standardized, and competition shifts to production efficiency and economies of scale. To support this need for efficiency, organization structures become more hierarchical and bureaucratic, which favor large, established business. 3. Before a dominant design emerges, learning curves are weak, allowing new firms to enter without operating at a severe competitive disadvantage. download instant at 16
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download instant at However, after a dominant design emerges, learning curves become more pronounced. Because efficient manufacturing, effective selling, and careful response to customer complaints all involve learning by doing, established firms, which have more operating experience than new firms, perform better.
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