When Disruptive Technology Threatens, Find a Partner

Conventional wisdom about disruptive technology is that it’s the technology part that causes the problems. Kodak didn’t see digital cameras coming, the story goes. Blockbuster got caught off guard by video streaming services. Borders collapsed in the wake of online retail.

In new research sponsored by the Mack Institute, Rahul Kapoor and co-author Thomas Klueter have added a twist to the usual narrative. They investigated how two key technologies, monoclonal antibodies and gene therapy, created disruptive challenges in the pharmaceutical sector from approximately 1990 to 2010. Their research examined how top firms went about investing in these technologies, and which strategies tended to pay off.

The key problem, the researchers found, was not a failure to predict impending changes. Most pharmaceutical firms, in fact, did anticipate that the two new technologies would inflict major changes in their industry, and the firms invested accordingly. Typical strategies included amped-up R&D, acquisition of intellectual property, or alliances with other organizations.

The crucial problems occurred when firms invested in the new technologies, but then botched the follow-up: they failed to transform their investments into actual new products or services.

“This is not about getting blindsided by a change. This problem is being aware of the change, investing in the new technology or innovation, but not taking it all the way through. The plan is there, but the implementation is not.” – Rahul Kapoor

Kapoor and Klueter found that when firms took a “closed” approach to disruptive technology — when they kept their research in-house or maintained tight control over their IP, for instance — they tended to get bogged down by inertia. Impeded by established patterns and rigid decision-making structures, these companies made discoveries but couldn’t push them forward, so they ultimately left them to collect dust on the shelf.

In contrast, when firms took a collaborative approach to disruptive technology, they achieved much greater success in actually developing new products. Alliance-based structures, Kapoor explains, “tend to be much more fluid, much more open to new ideas, and much more amenable to pushing the disruptive innovations to the marketplace.”

The lesson, then, is that when companies see great industry change looming, they must look at the challenge through as wide a scope as possible. By adopting an inward-facing strategy, they would risk the kind of inaction that leads to obsolescence. Instead, periods of disruption may offer the best time to think creatively about new partnership opportunities. When it comes to moving with the times, it turns out that the buddy system is the way to go.

Kapoor spoke at the Mack Institute’s Fall Conference 2014. Browse more Mack Talks here.