Organizational Capabilities

If an innovation is radical in the organizational sense, incumbents have two problems in exploiting it. In the first place, since the change is competence destroying, they do not have the capabilities to exploit it. In the second place, and perhaps more important, the firm’s existing capabilities may not only be useless, they may actually be a handicap to the introduction and development of the innovation. Firms find it difficult to break their habits, the routines and procedures they had put in place to exploit the old technology. They must unlearn the old ways of doing things. New entrants, on the other hand, do not have the burden of the old technology and can go on unencumbered to build capabilities for the innovation and exploit it.

If, on the other hand, the innovation is incremental, incumbents tend to dominate since the required knowledge builds on what they already have, but new entrants would have to build it from scratch.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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