Turning disruptive change into a competitive advantage

Original Post Source
By James B. Rice Jr. and Mario Dobrovnik

James B. Rice Jr. is deputy director, MIT CTL. He can be reached at .(JavaScript must be enabled to view this email address). Mario Dobrovnik is a research associate at Vienna University of Economics and Business. He can be reached at .(JavaScript must be enabled to view this email address).
May 4, 2017

In today’s fast-changing business environment, companies need to react quickly and decisively to disruptive market changes. Yet many enterprises lack the ability to respond swiftly to these competitive threats. The classic case of an enterprise that stumbled in this way is Kodak’s failure to adapt to the digitization of the film business. And ironically, Kodak was one of the early developers of digital photography.

But Kodak’s missteps are far from unique. For example, IBM failed to recognize how the locus of value changed from assemblers to component providers such as Intel and Microsoft, and lost their dominance of the personal computer market. Moreover, as the pace of change continues to accelerate, more companies are prone to being caught unaware when a transformative market change appears out of left field.

Today, this is happening in the auto market, which is witnessing a potentially dramatic shift in the locus of value creation away from global OEMs such as Ford, GM, Honda, Toyota and Volkswagen, and toward companies that are supplying technology for self-driving, connected and electrified vehicles. It’s unclear who will prevail, especially as a number of tech companies are making big investments in auto technology suppliers. Intel recently acquired Mobileye for $15 billion, Samsung acquired Harman International for $8 billion, and Apple and Google are making forays into producing their own vehicles. One pundit characterized this competition as the race to create “servers on wheels,” as computing takes precedence over the transportation function of vehicles.

In today’s fast-changing business environment, companies need to react quickly and decisively to disruptive market changes. Yet many enterprises lack the ability to respond swiftly to these competitive threats. The classic case of an enterprise that stumbled in this way is Kodak’s failure to adapt to the digitization of the film business. And ironically, Kodak was one of the early developers of digital photography.

But Kodak’s missteps are far from unique. For example, IBM failed to recognize how the locus of value changed from assemblers to component providers such as Intel and Microsoft, and lost their dominance of the personal computer market. Moreover, as the pace of change continues to accelerate, more companies are prone to being caught unaware when a transformative market change appears out of left field.

Today, this is happening in the auto market, which is witnessing a potentially dramatic shift in the locus of value creation away from global OEMs such as Ford, GM, Honda, Toyota and Volkswagen, and toward companies that are supplying technology for self-driving, connected and electrified vehicles. It’s unclear who will prevail, especially as a number of tech companies are making big investments in auto technology suppliers. Intel recently acquired Mobileye for $15 billion, Samsung acquired Harman International for $8 billion, and Apple and Google are making forays into producing their own vehicles. One pundit characterized this competition as the race to create “servers on wheels,” as computing takes precedence over the transportation function of vehicles.

Leave a Reply

Your email address will not be published. Required fields are marked *