The harsh news is that "getting stuck...

...on a local peak" is a certainty in the new economy.

Instability and disequilibrium are the norms; optimization won't last long. Sooner, rather than later, a product will be eclipsed at its prime. Indeed, an innovation at its prime increases its chances of being eclipsed. In Mastering the Dynamics of Innovation, a study of innovation in the automobile industry, Utterback concludes that "an unhappy byproduct of success in one generation of technology is a narrowing of focus and vulnerability to competitors championing the next technological generation." The product may be perfect, but for an increasingly smaller range of uses or customers.

While one product is perfecting its peak, an outsider can move the entire mountain by changing the rules. Detroit was the peak of perfection for big cars, but suddenly the small-car mountain overshadowed it. Sears was king of the retail mountain, but then Wal-Mart and Kmart's innovations created a whole new mountain range that towered above it. For a brief moment Nintendo owned the summits of the video-game mountain until Sega and later Sony built separate mountains even higher. Each of the displaced industries, companies, or products were stuck on a less optimal local peak.

There is only one way out. The stuck organism must devolve. In order to go from a peak of local success to another higher peak, it must first go downhill. To do that it must reverse itself and for a while become less adapted, less fit, less optimal. It must do business less efficiently, with less perfection, relative to its current niche.

This is a problem. Organizations, like living beings, are hardwired to optimize what they know--to cultivate success, not to throw it away. Companies find devolving unthinkable and impossible. There is simply no allowance in the enterprise for letting go.



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This is a blog version of a book of mine first published in 1998. I am re-issuing it (two posts per week) unaltered on its 10th anniversary. Comments welcomed. More details here.
-- KK