Why do companies rest on their laurels and not embrace change?

It is well-known that in order for companies to innovate and build sustainable businesses, they must adapt both their business model and products/services to match the marketplace and the consumer’s needs and wants.  But many businesses seem resistant to change, even ones that are/were dominant.  If this problem is widely-known, why does this exist?

Knowledge at Wharton examines a book by Black and Gregersen that examines this.  The article cites numerous examples that involve both companies and individuals.

In the case of mobile phones, Motorola was highly successful with analog phones.  Even though digital phone technology existed, it did not feel the need to invest in the future technology because their core competency was in analog technology, and digital technology was an expensive proposition for both the mobile phone producer and the carriers.  Nokia took an opportunity with digital technology, and became the largest mobile phone company in the world.   Samsung was for a while perceived to be a discount mobile phone producer.  It has made inroads in Asia where mobile phone penetration is amongst the highest in the world.  It also recognized the need for a camera in the handset, this was not to replace the digital camera, but rather used as a convenience instead.  Just as Motorola ignored Nokia, it paid dearly with respect to both earnings and market share.  By ignoring the emergence of Samsung as a competitor, Nokia also suffered from the same mistake as Motorola.  Will Motorola, Nokia and Samsung all suffer the same fate with the emergence of Apple and its iPhone? Only time will tell.

The historical example from the article mentioned a Spanish explorer named Cortes was commissioned to find the island of California.  Upon exploring the Gulf of Baja, he was convinced that California was an island.  Another explorer was sent to corroborate the findings of Cortes, and he too was convinced that California was an island.  Because the King of Spain believed this, and that there was difficulty to dispel this notion, it took more than 200 years to correct.

So, why did Motorola, Nokia, and Cortes rest on their laurels and did not effectively adapt to the changing ideas?  This was because both the companies and individuals did not fully understand the strength of new ideas and they did not take the time to fully understand them, and it has led to the downfall of these aforementioned companies and individuals.  More importantly, many companies or individuals are blinded by this missed opportunity because of their current successes in their present model or way of thinking.  Both people and companies develop mental maps on how certain procedures or ideas operate.  The longer these maps have been successful, the harder it is for people or companies to feel a need to switch.  These mental maps also guide both peoples’ and companies’ paradigms.  This trap can happen to any company and to anyone.

I also think that there are other reasons in addition to the ones stated in the article, in my opinion, these include: 1) The hardship and the difficulty that the businesses or individuals perceive as well as experience in order to fulfill the change;  2) Businesses or individuals believe that focusing on its core competency(ies) will minimize its potential failures;  3) From a cost perspective, being already invested in its core competency can reap both economies of scale and scope, and these would not be realized with focusing or investing in new technologies; 4) new and emerging technologies or ideas are unknown, and therefore risky.

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One response to “Why do companies rest on their laurels and not embrace change?

  1. Pingback: Innovation from users/consumers « Ideas make the world go round

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