The research described in this book is based on a field investigation of resource allocation in a very large firm. It was motivated by my conviction,… - Joseph L. Bower

When the technology that has the potential for revolutionizing an industry emerges, established companies typically see it as unattractive: it’s not something their mainstream customers want, and its projected profit margins aren’t sufficient to cover big-company cost structure. As a result, the new technology tends to get ignored in favor of what’s currently popular with the best customers. But then another company steps in to bring the innovation to a new market. Once the becomes established there, smaller-scale innovation rapidly raise the technology’s performance on attributes that mainstream customers’ value.

Each time a emerged, between one-half and two-thirds of the established manufacturers failed to introduce models employing the new architecture-in stark contrast to their timely launches of critical sustaining technologies.

We contest the conclusions of scholars such as Tushman and Anderson (1986), who have argued that incumbent firms are most threatened by attacking entrants when the innovation in question destroys, or does not build upon, the competence of the firm. We observe that established firms, though often at great cost, have led their industries in developing critical competence-destroying technologies, when the new technology was needed to meet existing customers’ demands.