Sep

19

There was an excellent article by Rebecca Henderson and Kim Clark in 1990 about cognitive shortcuts and the results of their use in changing product markets. A radical new technology innovation has many aspects, all of which are subject to change. However, over time a dominant design emerges, consisting of components and an overall architecture that consists of the relationships of the components. Once the dominant design is in place, successful companies focus their limited attention on improving the components and often organize departments around the components. The architecture is taken for granted and tacitly encoded in information filters, communication channels, and problem-solving strategies.

A problem can occur when a competitor introduces a new design with the same components but changes the relationships among the components, i.e., changes the architecture. Suddenly, a firm's information filters, communication channels, and problem-solving strategies are all wrong, and the firm often does not realize it. Henderson and Clark studied four major architecture changes in semiconductor equipment. In all four cases, the company with the largest market share of the old architecture lost its leadership position when the architecture changed. The continued use of perceptual filters led to mistakes that seem hilarious to outside observers. For example, a team of engineers, evaluating the product of the competitor that had captured 67% of the market, failed to recognize the competitor's key technological advance and pronounced the competitor's product a copy of their own.


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