05 Jul 2004  Research & Ideas

Radical Change, Entrepreneurial Opportunity

A key to exploiting radical technological change is to clear your vision of historical constraints and see new opportunities with a fresh perspective. Michael J. Roberts interviews HBS professor Mary Tripsas.

 

Mary Tripsas, Assistant Professor in the Entrepreneurial Management unit at Harvard Business School, is interested in how radical technological change transforms industries, and how such change affects established firms and creates entrepreneurial opportunities. Senior lecturer Michael J. Roberts, publisher of Harvard Business School's NewBusiness, recently sat down with Tripsas to learn more about her research.

Michael J. Roberts: How would you define the territory your work covers?

Mary Tripsas: Essentially I look at the creation and evolution of new technology-based industries, and the strategies of companies within those industries. In particular, I focus on how an industry gets defined: how consumers and other industry players make sense of, or frame, the industry, and the way that framing in turn affects how the industry takes shape and evolves. Early in an industry there is much technical variation that, over time, gets resolved, and we tend to see what has been called a "dominant design." I am interested in the interplay between that technical variation and cognitive variation as both manufacturers and users make sense of the industry.

An example would be the evolution of digital imaging. With a number of different technologies and mindsets competing, you have many firms with very different perspectives trying to make sense of what this new technology is and how they should deal with it. What interests me are two sides of this: If you're an established firm, how do you adapt to this really new technology? And as an established firm, how can you influence the perspective of others and ultimately the industry's evolution? In attempting to adapt, firms are constrained by their prior history: their particular skills, capabilities, assets, and, most importantly, mindset. Photography firms like Nikon, Canon, or Kodak, coming into this new arena, think about it very differently than Sony or another consumer electronics firm or HP or Intel as computer industry firms. So given the biases that arise from their history, how can firms best adapt? I think that insights into these questions can also help entrepreneurial firms understand where opportunity lies and how they can exploit it.

Q: Is it fair to say that companies are cognizant of their own technology strengths and push the dominant technology design in a way that they feel is to their advantage? It's a conscious strategy to play to their strengths?

A: I think that's right. For instance, Polaroid identified digital imaging as an opportunity very early on; in fact, you could argue that its mindset in terms of what the firm was good at enabled it to develop this radically new technology very easily in some sense. Polaroid had a lot of really smart scientists, and viewed itself as the Bell Labs of photography.

Q: How are some companies constrained by this framing?

A: Let's continue with the Polaroid example. In translating its mindset into a viable business model, it was very much constrained by its prior thinking about the industry and what its strengths were. It sort of said, "We have a razor/razorblade business model, and the way that we make money is through selling film, so we need to find a way to commercialize digital cameras with a film component." It had this digital camera back in the early '90s, but didn't actually come out with it until 1996 because it was trying to figure out a way to bundle it with a printer that would use Polaroid instant film. That fit into its "mental model" of how it made money.

Q: How can large companies overcome these constraints?

A: It's extremely difficult to have enough self-awareness as a company to understand how your thinking is framed by your previous history. How do you break out of that if you need to? Are there ways to do it without bringing in outsiders? I believe you don't have to fire the entire top management team and bring in a whole new team, but rather add key outsiders—who don't have the same history and the same biases—to the mix.

So, one issue is: How does our prior thinking about an industry constrain the way that we might enter a new industry? But a related issue is: How do you get others to buy into your perspective? Is a digital camera a substitute for an analog camera? Is it a PC peripheral? Is it something like a camcorder? And how do consumers make sense of it? What features do they value? Ideally, producers should proactively influence the analogies that consumers make. If Sony can get consumers to conceive of a digital camera as an extension of a camcorder versus an analog camera substitute, then consumers are more likely to favor Sony. Your goal is to influence the perception and purchase process of users, as well as a number of other institutional players that might be important. You have competing technologies, but at the same time, there are competing ways of making sense about what that technology is.

Q: To look at this through a more entrepreneurial lens, it seems clear that in these periods of technological ferment we often see new companies born.

A: That's right. Incumbents are constrained by their existing resources, capabilities, and mindset, and this simultaneously places a weight on the back of the large company and creates potential for the entrepreneur. For the most part you will find that startup companies are unencumbered by previous mental models of what an industry is or should be, and so you're likely to see much more creativity in their definition, if you will, of a new market.

It's extremely difficult to have enough self-awareness as a company to understand how your thinking is framed by your previous history.

Palm is a good example. Early on, there was a lot of confusion about what a PDA was; some early PDAs looked like substitutes for PCs, others like communication devices. Palm was the first firm to define a PDA as a complement to a PC; Palm's connectivity feature was key to this. A PalmPilot could be hot synced to a computer, making it a fundamentally different product category.

Q: So, if companies want to think more consciously about mental models, how can they use them strategically?

A: The use of rhetoric can be key in trying to establish a dominant imagery of products in an emerging industry. For instance, Microsoft rebranded its PDA operating system from Windows CE to Pocket PC in an attempt to influence users to think of a PDA as analogous to a PC. So by proactively defining the new product in a particular manner, the hope was to influence the way that people framed it. Another important tool for developing a common perspective about a new technology is joint experimentation with customers. Conducting market research in really new markets has limited value because users don't have any experience with the products, so it's hard for them to articulate their preferences. By structuring a few tightly coupled relationships with customers to engage in trials of different product concepts, producers and users can jointly learn about and make sense of the new technology. For instance, Surface Logix, a firm with highly sophisticated, flexible technology called "soft lithography," has established a close relationship with a pharmaceutical firm in order to experiment with different applications of the technology in drug discovery.

About the author

Michael J. Roberts is a senior lecturer at Harvard Business School.

Reprinted with permission from "The Winds of Change: A Conversation with Professor Mary Tripsas," NewBusiness, Spring 2004.