Niche Markets for Obsolete Technologies
| Peter Klein |
One of the most interesting papers I saw presented at this year’s ACAC meeting was Ron Adner and Daniel Snow’s “‘Old’ Technology Responses to ‘New’ Technology Threats: Demand Heterogeneity and Graceful Technology Retreats.” They show how incumbents sometimes react to disruptive innovation by repositioning the old technology as a niche product, aimed at specialized users or enthusiasts. Their examples are fascinating. One-way pagers, for example, are still popular in hospitals because their low-powered signals work better around, and interfere less with, complex medical equipment. Many audiophiles prefer vinyl records, with their rich, analog sound, to digital media. (Needles for high-end turntables sell for thousands of dollars.) Calligraphers prefer fountain pens to ball-point pens. And so on. Adner and Snow present a taxonomy of “reactive” strategies by incumbents facing innovative entrants and characterize the benefits and costs of each strategy. Here’s the abstract:
We explore the implications of a real and common alternative to attempting the transformation required to embrace a new, dominant, technology — the choice to maintain focus on the old technology. In considering this choice we distinguish between ‘racing’ strategies, which attempt to fight off the rise of the new technology by extending the performance of the old technology, and ‘retreat’ strategies, which attempt to accommodate the rise of the new technology by repositioning the old technology in the demand environment. Underlying our arguments is the observation that the emergence of a new technology does more than just create a substitute threat — it can also reveal significant underlying heterogeneity in the old technology’s broader demand environment. This heterogeneity is a source of opportunities that can support a new position for the old technology, in either the current market or a new one. Using this lens we explore the decision to stay with the old technology as a rational, proactive choice rather than as a mark of managerial and organizational failure. We then consider the distinctive challenges and organizational dynamics that arise in technology retreats, and their implications for the ways in which managers and scholars should approach questions regarding the management of capabilities, lifecycles, and ecosystems.
I came across another example this summer, in a NY Times piece on a Dutch firm resurrecting the Polaroid camera. And there was the 2006 Darren Aronofsky film The Fountain, which used a low-tech combination of soap bubbles, oils, and other liquids rather than digital technology to create its unusual visual effects.