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Technological obsolescence: Insights from the PC industry

Authors:
Technologicalobsolescence:InsightsfromthePCindustry
SimonFordsjf39@cam.ac.uk
Writtenasaworkingpaperin2010.
1.Introduction
Studiesoftechnologicalandindustrialchangefocuspredominantlyontheearlystagesor
frontendofentrepreneurship,design,andproductplanningandportfolios(Shaneand
Ulrich,2004).Modelsoftechnologicalchangehavetraditionallybeencharacterisedin
lifecyclestermsasoccurringthroughfourstages:introduction,growth,maturityand
decline.Longertermchangecanbeviewedthroughoverlapping‘Sshaped’performance
curves(Foster,1986).Discontinuitiesinterruptperiodsofincrementalperformance
improvements,aviewoftechnologicalchangethatistermed‘punctuatedequilibrium’
(AdnerandLevinthal,2002).Evolutionaryaccountsdescribetechnologicalchange
throughthegenerationofvariety,theselectionthatactsonthisvariety,throughtoits
retentionandlaterelimination(Metcalfe,1998).
Theemphasisofnoveltycreationhasledtoarelativeneglectofthelatterportionof
theselifecyclesandprocesses.Inthispaperweaddressquestionsraisedbythedecline
andeliminationoftechnologies,erstwhileinnovations.Ourstartingpointforconsidering
theissueofobsolescencebeginsovertwohundredyearswiththeobservationsof
CharlesBabbageontheintroductionofnewcapitalequipment.
“Machinery for producing any commodity in great demand, seldomactually
wearsout;newimprovements,bywhichthesameoperationscanbeexecuted
eithermorequicklyorbetter,generallysupersedingitlongbeforethatperiod
arrives: indeed, to make such an improved machine profitable, it is usually
reckoned that in five years it ought to have paid itself, and in ten to be
supersededbyabetter.”(Babbage,1963)
Babbageprovidesanearlyglimpseofwhatwastocome:thatthereplacementofcapital
equipmentwouldresultnotfrommechanicalfailurebutinsteadthroughnew
technologiesbeingdevelopedthathadimprovedperformanceattributes.Foreachof
theseformsofobsolescencethereisaphysicalconsequence,whichiscommonly
referredtoaswaste.Addressingthisissuehasbecomeincreasinglyimportantas
environmentalsustainabilityissueshavegainedrecognition.Whileitundoubtedly
deservesattention,itisanotheraspectofobsolescence,thatwhichoccurswhen
technologicalperformanceofproductsissupersededandfirmsceasetoofferproducts
tothemarket,towhichwedirectourattentionhere.
InthispaperSchumpeter’sconceptofcreativedestructionisrevisitedasweobserve
whathappenswhenthewaveofcreativedestructionbreaks(Schumpeter,1934).ThePC
industryisinvestigated,1withexistinghistoricalaccountsdrawnonsothatthefactors
thathaveshapeditsevolutionandtechnologicalobsolescencecanbeexamined.Indoing
soitisfoundthattechnologicalandindustrialchangeiscoevolutionaryandthatcomplex
dynamicsoperateaslargenumbersofactorsinteract.Thepurposeofouranalysisisto
revealinsightsintohowtechnologicalobsolescencearisesandtheformsittakes.By
shiftingattentiontothebackendofthetechnologylifecycle,attemptsaremadeto
deriveinsightsthatcontributetoourunderstandingoftechnologicalchangeand
innovationtheory.
2.Obsolescenceconcepts
2.1Aspectsofproductobsolescence
Anumberofrecentstudieshavesoughttoexploretheconsumptivedimensionof
productobsolescence,withacomprehensivereviewofthesepresentedbyCooper
(2004).Thisreviewhighlightstheimportantdistinctiontobedrawnbetweenabsolute
andrelativeformsofproductobsolescence.Absoluteobsolescenceoccurswhena
producthasphysicallydeterioratedtothepointatwhichitdoesnotprovidethe
consumerwiththefunctionalityforwhichitwasbeingconsumed.Incontrast,relative
obsolescenceoccurswhentheconsumermakessomevaluejudgementregardingits
continuedconsumption,oftenfollowingacomparisonwithotheravailableproducts.
Relativeproductobsolescenceisidentifiedasarisingthroughconsumers’objectiveand
subjectiveassessmentsoftheproductstheyconsume.Thevariousmotivationsare
summarisedinTable1.Functionalobsolescencehasbothobjectiveandsubjective
dimensions.Forinstance,anexistingproductmightbemadeobsoletebecauseanew
productpossessesimprovedfunctionalityintermsoftheprimaryfunctionalityforwhich
theproductisbeingconsumed(objectivedimension).However,thenewproductmight
possessthesameprimaryfunctionalityastheoldproductbutalsoofferfurtherutility
alongotherdimensionsthattheconsumerfindsdesirablebutwhichtheydonotasyet
anticipateusing(subjectivedimension).
Furtherdistinctionsaretobedrawnbetweendifferentmodesofobsolescence,between
technological obsolescenceandstyleobsolescence.Theformeroccurswhensignificant
technicalimprovementsleadtothecreationofamoreeffectiveproduct.Forexample,in
audiostorage,vinylphonographrecordsweresupersededbycassettetapes,whichwere
inturnsupersededbycompactdiscs,thenagainbydigitalmusicplayers.Thistypeof
obsolescenceisgenerallyconsideredtobesociallyandeconomicallydesirable,because
1WhilenowcommonlydescribedasthePC,productsofthiskindwerefirstknownasmicrocomputers,
beforetheIBMPCbecamethedominantdesign.ThetermsPCandmicrocomputerareused
interchangeablyinthispaper.
thereplacementproductoffersgreaterbenefitsand/oralowercost.Incontrast,style
obsolescenceariseswhensuperficialcharacteristicsofaproductarealteredsothatthe
newmodeliseasilydifferentiatedfromthepreviousmodel.Alsodescribedas
‘psychological’or‘fashion’obsolescence,theintentionistomakepeoplefeeloutmoded
iftheycontinuetouseoldmodels.Productssubjecttothistypeofobsolescenceinclude
clothing,furnitureandautomobiles(Etzeletal.,2000).
ObjectivedimensionSubjectivedimension
Function(Packard,1961;Kostecki,1998)
Changeinconsumerneeds(Heiskanen,1996)
Economic(Kostecki,1998;Cooper,2004)
Function(Packard,1961;Kostecki,1998)
Desirability(Packard,1961)
Dissatisfaction(Heiskanen,1996)
Symbolic(Kostecki,1998)
Table1Dimensionsofrelativeobsolescence
2.2Plannedobsolescence
Styleobsolescenceisattheheartoftheplannedobsolescencemovementthatbeganin
theautomotiveindustryinthe1920sandwhichcanbetracedtothepresidencyofAlfred
P.SloanatGeneralMotorsinthe1920s.Atthetimeofthisappointment,theUS
automobilemarketwasreachingsaturationandSloan’ssolutionwastointroducevariety
intothemarket.IndoingsohesoughttoobsoleteHenryFord’sbusinessmodelofmass
productionofasingletypeandcolourofautomobile.Thestrategywastointroducenew
automobilemodelseachyearwithdifferentstyles,shapesandcolours.Sloan’sintention
wastocreatedemandforthenewvalueand,sotospeak,createacertainamount of
dissatisfaction with past models as compared with the new one”(PettiferandTurner,
1984).
Thisstrategyofplannedstyleobsolescencegavetheillusionofimprovementand
resultedinnew(oldmodel)automobileslosing30%oftheirvalueiftheyhadyettobe
soldbythechangeoverdaywhenthenewmodelsappeared(Lacey,1986).Pursuingthis
strategyofplannedobsolescencewasamongthereasonswhyGeneralMotorsdisplaced
FordastheleadingUSautomobilemanufacturer(Chandler,1990;Porter,2004).
InthedecadefollowingtheSecondWorldWar,plannedobsolescencerepresenteda
meansthroughwhichUSfirmstheycouldincreasetheirrevenuesatatimewhen
consumerswerereluctanttospendalargeproportionoftheirincomes.Thisheraldedthe
beginningofshorterproductlifecycles,oftenthroughareductioninthedurabilityofthe
productssold.Economistsstudyingthephenomenonsoughttounderstandhowlong
goodsshouldbedesignedtolastandwhenthemostprofitablemomentwasforfirmsto
introducenewproducts(e.g.Bulow,1986;Swan,1972).Inmostofthesecasesdurability
hasbeenthefoundationforthesestudiesasmanufacturingfirmshavebeencapableof
engineeringtheirproductstofailafteradeterminedperiodoftime,adesignedfailure
processthatisdealtwithin‘valueengineering’.
2.3Obsolescenceandcompetition
Inaddressingtheissueofobsolescence,Babbagedidsoinconsiderationoftheeconomic
consequencesoftheobsolescenceofcapitalequipmentforthefirm.Hebelievedthatin
additiontothedecreasingmarketvalueofexistingequipment,competitionwouldalso
leadtoareductioninthedurabilityofdurablegoodsbecauseitwouldleadtoinstances
whenitbecamecheapertopurchaseanewproductthantorepairadamagedone
(Babbage,1963).Competitionfromnewproductsonthemarketrepresentsathreatbut
thefirmalsobecomesuncompetitiveinitscosts.Rapidproductobsolescencecancause
dramaticproblemsintermsofunderrecovereddepreciation,increasedcapital
requirements,andthesaleofcapitalequipmentlongbeforeitsusefullifeisover.Asa
consequenceofthisrapidobsolescence,organisationsoftenmakeinnovationahigher
priorityandattempttoreducenewproductdevelopmenttime(Hussey,1998).
Duringtheirinnovationexperiments,establishedfirmsfacethedilemmaofdeciding
whentoholdontoexistingproductsorwhentochangestrategybybackingnew
technologies(ChandyandTellis,1998).Thereistheriskofcannibalisation:thenew
productscouldunderminetheirexistingproducts,cannibalizingtheirmarketsand
existingrevenuestreams.Thereisalsotheadditionalconcernthattopursuesuchan
innovationwouldbecompetencedestroying(LeonardBarton,1995).
Againstthisisthethreatthatanexistingcompetitorornewentrantmightintroducea
newtechnologythattransformsthemarketlandscape(Christensen,1997).Suchissues
aremostpolarisedwhenconsideringdiscontinuousinnovationsbutarealsoofconcern
tofirmspursuingincrementalinnovationandthemaximisationofrevenuestreams.A
blockingstrategymaybeeffectiveifthefirm’scompetencesandassetsareuniqueand
inimitable,orforaslongastherearesignificantbarrierspreventingtheentryof
competitors.However,technologicaldiscontinuities,changesinconsumerpreferences
andIPRcircumventionbycompetitorscanrendertheseobsolete.Therecognitionthat
theblockingstrategyonlydelaystheinevitableformsthemotivationforthe‘running’
strategy,inwhichthefirmmustmaintainaninnovativeleadoveritscompetitorsby
bringingabouttheobsolescenceofitscapabilitiesandthecannibalisationofitsproducts
beforecompetitorsdoso(Afuah,2003).
3.MethodologicalApproach
Toexploretechnologicalobsolescence,thispaperanalysesthePCindustry.Attentionis
focusedontechnologicalobsolescenceduringtwoparticularphasesofitsevolution:
Theearlystageoftheindustry(19741987),duringwhichexperimentationfrom
microcomputingventuresgaverisetosubstantialvarietyandthesubsequent
emergenceofadominantdesignthroughmarketselectionandpropagation.
Thematurestageoftheindustry(1987onwards),wheninnovationwaslargely
incrementalandthemarketwasbecomingmoresaturated.
Thisindustryisselectedasanexemplarbecauseoftherapidityofnewgenerationsof
product(asfruitfliesprovideagoodexampleforgeneticsresearch),andforthe
numerouspreviousaccountsandstudies(Allan,2001;BresnahanandGreenstein,1999;
CampbellKellyandAspray,1996;Cringely,1992;CurryandKenney,1999;Flamm,1988;
FreibergerandSwaine,2000;Langlois,1992).Theseaccountsprovidearichsetofdata
thatcanbedrawnon,withthefamiliarityofthematerialenablingfeaturesof
technologicalobsolescenceduringtheindustry’sevolutiontobehighlighted.The
approachtakeninthispaperwillbeexploratoryandexplanatoryincharacter,adopting
aninductivemethodologysoastorevealinsightsintothenatureoftechnological
obsolescenceinthePCsector.
4.TechnologicalObsolescenceinthePCIndustry
4.1TechnologicalobsolescenceintheearlyPCindustry
VarietywasgeneratedintheemergingPCindustryashundredsoffirmsenteredthe
market,eachofferingtheirownmicrocomputer.Outofthisferment,IBMemergedasthe
industryleaderwiththeIBMPCselectedasthe‘dominantdesign’(Utterback,1994).A
shakeoutoftheindustryfollowedthisselectionprocess,asthemajorityofthose
microcomputersincompatiblewiththeIBMPCwererejectedbythemarket.Subsequent
incrementalinnovationswerebasedaroundtheIBMarchitectureasthe‘clone’
manufacturersofferedmicrocomputerscompatiblewiththeIBMPC.
4.1.1Experimentationandobsolescenceintheearlymicrocomputermarket
TheearlyyearsofthePCindustrywerecharacterisedbyahighdegreeof
experimentation.EarlycomputingkitssuchastheMITSAltairwereadoptedby
pioneeringusersbecausetheyhadbecomefrustratedbythehighcostsandlimited
accesstomainframesandminicomputers.Theseuserswerelookingforalternative
solutionsandtodosomethingnewtheywerepreparedtoacceptrelativelyunreliable
productswhichrequiredsignificantlearningtomaster.Thesepioneerswereprimarily
hobbyistswhowerewillingtolearntowritetheirownsoftware.Furthermarket
penetrationbroughtmicrocomputersintocontactwithhomeandbusinessuserswhodid
nothavethemotivationtoacquirethisdegreeofmastery.Reachingthiswiderrangeof
userscausedashiftinthekeyrequirementsofmicrocomputers,withusabilityand
reliabilitycomingtothefore(Garnseyetal.,2006).
Thisshiftinrequirementsbroughtabouttheentryofasecondwaveoffirmsoffering
moresophisticateddeviceswhichdidnotrequireassemblyortechnicaltraining,along
withprepackagedsoftware.ForemostamongthesewereApple,Commodore,
Tandy/RadioShackandAtari.Concurrently,thischangeinuserrequirementsbrought
aboutthetechnologicalobsolescenceofmanyofthehobbyistkitsandthemarketexitof
theirdevelopers,includingMITS,Cromenico,IMSAI,OSI,PolyMorphicSystems,Processor
TechnologyandSwTPC.Oftheoriginalhobbyistfirms,onlyApplemadethesuccessful
transition,successfullylaunchingtheAppleIIintotheconsumermarketin1977(Allan,
2001).
By1981,ofthealmost100firmsinthemicrocomputermarket,3microcomputers,the
AppleII,theTRS80andtheAtari100/800,sharedapproximatelyhalfofthemarketwith
combinedsalesof660,000systems(Figure1).Throughoutthisearlyperiodof
experimentation,marketentrywasdeterminedbytheabilitytoinnovateandthe
availabilityofsystemcompatiblesoftware(Stavins,1995).Aseachfirmdevelopedtheir
ownplatform,nosinglefirminthemarkethadcontroloverthearchitecture,interface
standardsoroperatingsystem(Mazzucato,2002).
0
100
200
300
400
500
600
700
1975 1976 1977 1978 1979 1980 1981
Year
Annual sales (thousands)
IBM PC & clones
Apple ll
Atari 100/800
TRS-80
Other
Figure1Annualsalesofmicrocomputingfirms,19751981(Reimer,2005)
4.1.2Theemergenceofadominantdesigninmicrocomputing
TheintroductionoftheIBMPCin1981broughtaboutsignificantchangeintheemerging
PCindustry.Whilepreviousmicrocomputingplatformswerebasedonproprietary
systemarchitectures,theuseof‘offtheshelf’componentsandanopenarchitectural
standardwasakeyfactorinthemarket’sselectionoftheIBMPCasadominantdesign.
Thisselectioncausedanindustryshakeoutoffirmsproducingmicrocomputerswith
incompatiblearchitectures.SowhilethemarketforPCsgrewby50%in1983,anumber
ofimportantcompetitorstoIBMhadsubstantialbusinessproblems,including
Commodore,AtariandTexasInstruments,withthisleadingtomarketexitinthecaseof
TimexSinclair,Osborne,ColecoandMattel.
TheadoptionoftheIBMPCasthedominantdesignwassorapidthatin1984,49%of
personalcomputersalestobusinessfirmswenttoIBMPCcompatibles,withonly13%to
Apple(Utterback,1994).Intermsofnumbersofdifferentmodelsandnewcompanies
enteringthepersonalcomputerindustry,19821983canbeconsideredthepeak.
AnalysisbyModisandDebecker(1988)describeshow125distinguishablenewPCswere
introducedby18newfirmsonaverageineachyearofthisperiod.However,withinfive
yearstheserateswereonly82newmodelsgeneratedby14companies(Modisand
Debecker,1988).
0
1000
2000
3000
4000
5000
6000
1981 1982 1983 1984 1985 1986 1987
Year
Annual sales (thousands)
IBM PC & clones
Apple ll
Macintosh
Amiga
Atari 100/800
Atari ST
Commondore 64
TRS-80
Other
Figure2Annualsalesofmicrocomputingfirms,19811987(Reimer,2005)
TheemergenceoftheIBMPCasadominantdesignbroughtaboutanindustryshakeout
thatalsoresultedinthetechnologicalobsolescenceofanumberofcompeting
microcomputerswherewere,insomeinstances,superiorintheirtechnological
performance.Figure2showstheobsolescenceoftheTRS80andAtari100/800inthe
periodfollowingtheintroductionoftheIBMPC,alongwiththedecreaseofsalesof
microcomputersotherthanthoselistedtothepointatwhichtheybecamenonexistent.
4.1.3Obsolescenceofcomponentsandcomplementarytechnologies
TheacceptanceoftheIBMPCasthedominantdesignalsobroughtabouttheconcurrent
acceptanceofsomeofitscomponentsasdominantdesigns:theIntelmicroprocessor
(the8088)andMicrosoftoperatingsystem(MSDOS)(Afuah,2003).Thisselectioncanbe
observedintheanalysisofTegardenetal.(1999),whoexaminetheeffectoftheIBM
PC’sselectionasthedominantdesignontheapplicationofIntelmicroprocessorsin
microcomputers.Theiranalysismakesacomparisonbetweenan‘EraofFerment’,the
periodoftimespanningtheintroductionoftheMITSAltairin1974tothatoftheIBMPC
in1981(19751981),andthe‘EraofIncrementalChange’,theperiodfollowingthe
selectionofthedominantdesign,theIBMPC(19821988).
Over75%ofPCmanufacturersenteringthemarketduringtheeraoffermentdecidedto
designtheirsystemarchitecturesaroundnonIntelmicroprocessors.Asubstantial
proportionofthesefirmschangedtheirdesignstrategy,switchingtotheIntel
microprocessorsothatoverhalfoffirmsthatenteredduringtheeraoffermentwere
thendevelopingarchitecturesbasedaroundtheIntelmicroprocessor.Incontrast,over
84%ofPCmanufacturersthatenteredthemarketfollowingtheselectionoftheIBMPC
asthedominantdesignbasedtheirarchitecturesonanIntelmicroprocessor(Figure3).
Varietyreductionoccurredinthemicroprocessormarketfollowingtheselectionofthe
IBMPCastheIntelmicroprocessorswerepropagated.TheAppleII,Atari400and800,
andCommodorePEThadbeenpoweredbymicroprocessorsdevelopedbyMOS
Technology,whiletheTRS80waspoweredbytheZilogZ80microprocessorandHP
developedaproprietarymicroprocessorforitsHP85personalcomputer(Allan,2001).
Thisillustrateshowtheselectionofaproductleveldominantdesigncanalsogiveriseto
theselectionofacomponentleveldominantdesign.Itshowshowtheobsolescenceat
theproductlevelcanalsobringaboutcascadeoffurtherobsolescenceatthecomponent
level.
Meanwhile,theshifttowardstheIBMPCasahardwarestandardandtheincremental
increaseinthesalesofIBMPCsoftwareproducedbroughtaboutacascadeeffect,
leadingtotheselectionoftheIBMPCattheexpenseofAppleandCommodoreproducts.
Applesoftwarehadmadeupabout85%ofthemicrocomputersoftwaremarketin1982
butwithinayearthishadfallento35%asapplicationsfortheIBMPCrapidlyexpanded
(Gabel,1991).Thischangewassorapidthatbyearly1987,over80%ofsoftwareonthe
marketwascompatiblewiththeIBMPC(Grindley,1995).Whilesomefirmswereableto
rewritetheirsoftwaretorunontheIBMPC,theneedforcompatibilitybetweenthePC,
operatingandsoftwarealsobroughtabouttheobsolescenceofcomplementarysoftware
applications.
Wethereforeseethattheindustryshakeoutfollowingtheemergenceofthedominant
designlednotonlytotheobsolescenceofcompetingdesignsbutalsotothe
obsolescenceofcomponentsandcomplementarytechnologieswhichweredependent
onthesecompetingproductarchitectures.
0%
20%
40%
60%
80%
100%
Era of Ferment (101 firms) Era of Incremental Change
(362 firms)
Percentage of firms
Entered with non-Intel microprocessor,
never switched to Intel microprocessor
Entered with Intel microprocessor,
switched to non-Intel microprocessor
Entered with non-Intel microprocessor,
switched to Intel microprocessor
Entered with Intel microprocessor,
never switched to non-Intel
microprocessor
Figure3Microprocessordesignchoicesinthe‘EraofFerment’(1975–81)and
‘EraofIncrementalChange’(19821988)(adaptedfromTegardenetal.,(1999))
4.2ObsolescenceinthematurePCindustry
WenowturntotechnologicalobsolescenceinthematurePCindustry.Inmaturemarkets
wherecustomerpenetrationisalreadyhigh,thekeytofurtherindustrygrowthliesinthe
firm’sabilitytoselltorepeatbuyers,eitherthroughstimulatingtherapidreplacementof
theproductorbyincreasingpercapitaconsumption(Porter,2004).Firmsinthemature
PCindustryfacethisproblembecauseasinitialadoptermarketshavematuredand
becomesaturatedtherehavebeenfewernewcustomerstowhomtheycanselltheir
products.
Thechallengefacingfirmsrelyingonexistingmarketstocontinuetogrowandmake
revenuesthatsatisfytheexpectationsofinvestorsisconvincingtheirexistingcustomers
thattheircomputingneedsarenolongermetbythetechnologiestheyalreadyconsume.
Inotherwords,consumersmustbecomedissatisfiedwiththeirexistingsystemor
components.Itappearsunavoidableforestablishedfirmsinmaturemarketstofollow
strategiesthatresultintheobsolescenceoftheirexistingproductsandcannibalisationof
theirmarketsiftheyaretochangewiththetimes.AformerVicePresidentatIntel,Albert
Yudescribedhow“oneoftheinevitableconsequencesofMoore’sLawisthatifyoudon’t
drivetoobsoleteyourownproducts,someoneelsewilldoitforyouandleaveyoubehind”
(Yu,1998).Inthesectionsthatfollowweexplorehowobsolescencearisesinthemature
PCindustry,focusingprimarilyonitsplatformleaders,MicrosoftandIntel.
4.2.1Modularityandobsolescence
ThemodulararchitectureofthePCmeansthatinprincipalitissubjectto‘modularityin
design’(BaldwinandClark,1997).Anidealmodulararchitecturewouldhaveeach
componentindependentofoneanothersothatchangestoasinglemoduledonotaffect
others.However,inthecaseofthePC,interdependenciesbetweencomponents
contributetosystemicobsolescence.Forexample,torunthelatestWindowsoperating
systemmayrequireuserstoupgradetheirmicroprocessorsoastoimprove
performance.However,thenewmicroprocessormayhaveadifferentinterfacetothe
motherboard,sorequiringtheupgradeofthemotherboard.Inaddition,theinterface
betweenthemotherboardandmemorymayalsohavebeenupgraded,requiringnew
memorychipstoalsobepurchased.Thisexampledemonstratesthelackofbackward
andforwardcompatibilitythatcanexistbetweennewandoldcomponentssuchasthe
microprocessor,motherboardandmemorychips.Itpointstothefactthattechnical
obsolescencecanoccurfrombothcomponentinnovationorfrominterface/architectural
innovation.
Themoduleinterdependencymeansthattheobsolescenceofthesecomponentscan
oftenmeantheobsolescenceofothersystemcomponents.Thedecreasingcostofready
builtPCsystemsfromvendorssuchasDellmeansthatthecomponentupgradepathhas
becomelessattractivetocustomers,regardlessoftheITcompetenceonthepartofthe
PCuser.Thisevenaffectscomponentssuchasharddiskdrivesthathavenotin
themselvesbecomeobsoletefrominterfaceinnovation.Thereplacementofentire
systemsmeansthatproducersgenerateincreasedcomponentsales,providingfinancial
securitytoproducersandretailers,andincreasingreturnstotheshareholdersofthose
companies.
4.2.2Expectationsandtechnologicalobsolescence
ExpectationsplayanimportantroleinthepaceofinnovationinthePCindustry.Their
effectsaresuccinctlydescribedbyJerryKaplan,foundingCEOofthehitechstartup,Go.
“All computer products are hopelessly interdependent … applications
designersexploitoperationsystemstailoredtocomputersbuiltaroundchips
that implement protocols based on specificationsdeveloped in committees
staffedbyapplicationsdesigners.Everyoneinthisevolvingloopmustguess
which new technologies are most likely to provide a solid and enduring
platform on which to build their own piece. The problem is thatthese
commitments must be made long before the surrounding pieces areever
delivered because the computer business moves so fast that waiting is
suicide.Soresourcesareallocatedonthebasisofpromisesandreputations,
notobservablefacts…Butonceafoundationischosen,itisalwayseasierto
work around flaws than to start anew somewhere else. So the successful
playersinthis elaborateguessinggamearethosewho areabletopersuade
the most people to bet on them because this justifies enough continuing
investmenttoshoreuptheirgoodsbeforetheirsupportersdefecttoanother
platform.”(Kaplan,1995)
Oneofthemostfundamentaloftheseexpectationsis‘Moore’sLaw’,apredictionasto
theincreasingcomplexityandperformanceofmemorychips.GordonMoore,cofounder
ofIntel,madethepredictionofsemiconductorperformancedoublingeverytwelve
monthsthroughtheextrapolationofadvancesmadeinincreasingthedensityof
transistorsonasinglesiliconmicrochip(Moore,1965).Revisitinghispredictionadecade
later,Mooresettledoneighteenmonthsasthedoublingperiod(Moore,1975).Although
therateofadvancesisfoundedoneconomicandfinancialprinciples,this‘law’has
becomesomethingofaselffulfillingprophecywithintheindustry,withMoorehimself
acknowledgingitspsychologicalcomponent:
“Morethananything,oncesomethinglike this gets established,it becomes
more or less a self‐fulfilling prophecy. The Semiconductor Industry
Associationputsoutatechnologyroadmap,whichcontinuesthisgeneration
everythree years. Everyone in the industry recognizes that if you don’t stay
on essentially that curve they will fall behind. So it sort of drives itself.”
(Moore,G.E.,1996)
TheInternationalTechnologyRoadmapforSemiconductorscanbeconsidereda
formalisationofMoore’sLawasitsetsdevelopmenttargetsforglobalsemiconductor
firmsastowhatwillbeproducedandhowthiswillbeachievedinthenextfifteenyears
(ITRS,2009).Theroadmapprovidesatechnologytrajectorythatthewhole
semiconductorindustrycanfollow,aconsensualapproachthatisinstarkcontrasttothe
highlyadversarialnatureoftheearlysemiconductorindustry(BrowningandShetler,
2000).
4.2.3Technologicalobsolescencethroughplatformleadership
IntelandMicrosoftarethetwofirmsnotsubjecttothecompetitivepressuresleadingto
commoditisation.InthedecadefollowingtheintroductionoftheIBMPC,Inteland
MicrosoftbecameplatformleaderswithinthePCindustryastheIBMPCbecamethe
dominantmicrocomputingarchitecture(GawerandCusumano,2002).IntelCEOAndrew
GrovedescribestheprocessesthatkickstartedIntel’srisetoitscurrentpreeminent
position.
“After1981,whenIBMchoseInteltoprovidethemicroprocessorintheirPC,
Intelgrewtobecome themostwidelyacceptedsupplierofmicroprocessors.
After that, industry participants in the layers above, i.e. computer
manufacturersandoperatingsystemssuppliers,founditmoreeconomically
advantageous to build their business on Intel architecture microchips than
onanyother.Why?Becausetherewerealotmoreofthosebeingproduced
everyyear.Ifyoubaseyourbusinessonthevolumeleader,youwillbegoing
afteralargerbusinessyourself.”(Grove,1997)
ItsfirstmoverpositionprovidedIntelwithacompetitiveadvantagethatithas
maintainedoverrivalssuchasIBM,MotorolaandAMD.Intheearly1990s,Intelrealised
thattheinterfacesbetweencomponentswerebecomingbottlenecksinthesystemand
thatinterfaceinnovationwasrequired.However,tochangethesystemarchitecture
requiredleadership.Thedecisiontoreleaseasystemarchitectureusingnonproprietary
componentshadleftIBMwithouttheabilitytodictatethischange.InsteaditwasIntel
thatledtheinnovationbychampioningthePCIstandardasadataexchange
improvementovertheexistingstandard,ISA.ThisgaveIntelcrucialcredibilityinthe
industry.
ThesuccessofMicrosoft’sMSDOSandWindowsoperatingsystemsderivesfromthe
necessityforasinglestandardforwhichapplicationsoftwarecanbewritten.Groveagain
describesthedynamicsinoperation.
Developersofapplicationsprogramsweredriventowardvolumeas well.
Their alternatives were to develop a product based on Microsoft’s market‐
share‐leadingWindows oroncompetitiveoperating systems with asmaller
share. Over time they chose to base their work on the former, gradually
reinforcingthesuccess of Intel’smicroprocessors and Microsoft’soperating
system.”(Grove,1997)
OnceIntelandMicrosoftachievedacriticalmassintheinstalledbase,producersof
complementarytechnologiesandcustomersbecome‘lockedin’totheirdominant
standard;thesizeofthemarketprovidedproducerswiththegreatestsalesopportunities
andcustomerswiththegreatestvarietyofsoftwareapplications(ShapiroandVarian,
1999).Oftendescribedasthesingularentity‘Wintel’,IntelandMicrosoftstrategically
innovateandobsoletetheirexistingproductssothattheyremainthedominantindustry
players.Thisdominancehasenabledotherfirmsto‘piggyback’ontheirsuccessthrough
thedevelopmentofcomplementarytechnologies.Thesetechnologiesinturnaddvalue
tothepersonalcomputer,reinforcingthelockintotheWintelstandard.
4.2.4Stimulationofuserdemand
BothIntelandMicrosoftusetheirpositionsofdominancetoshapethemarketina
mannerthatprovidesthemwithacontinuedcompetitiveadvantage.AsJamesF.Moore
describesit:“Intel’ssuccessispredicatednotjustonmakingfaster chips,butonmaking
surethereisdemandforthemwithintheecosystem(Moore,J.F.,1996).Itisthrough
stimulatingdemandforitsnewmicroprocessorsattheexpenseoftheobsolescenceofits
oldtechnologiesthatIntelisabletogeneraterevenuesinamatureandcloseto
saturatedmarket.Itdoesthisbyembeddingitselfwithinabusinessecosystemthatrelies
onitsinnovationtrajectorytomaintaingrowth,anddevelopscomplementary
technologiestoprovidegreatervalue(Moore,J.F.,1996).
TheIntelArchitectureLab(IAL)hasbeenanimportantplayerinthisdemandstimulation.
DavidJohnson,adirectoratIALin1999,explainsitsrole:
“OurjobatIAListohelpbeacatalystsothatnewapplicationsornewusers
ofapplicationshappenthattakealloftheCPUpowerwecanproduce.Then
that’sanincentiveforsomeonetosay:“Thatuseorapplicationisimportant
tome.Andtodothatwell,Ineedtobuyit.”(GawerandCusumano,2002).
JohnsonalsoexplainsthattheIALisonlyinterestedinsupportingnewtechnologiesthat
willtakeupasizableproportionofprocessingpower,whatAndyGrovehascalled‘power
hungryapplications’(Burgelmanetal.,2004).Thisleadstothereasonforthespecial
relationshipbetweenhardwareandsoftware,andoftheaffinitybetweenInteland
Microsoftinparticular.AsformerMicrosoftCTO,NathanMyhrvoldexplains:
“We have increased the size and complexity of software even faster than
MooresLaw.Infact,thisiswhythereisamarketforfasterprocessors –
softwarepeoplehavealwaysconsumednewcapabilityasfastorfasterthan
thechippeoplecouldmakeitavailable”(Schaller,1997).
IncreasingprocessingpowerdemandsfromnewMicrosoftsoftware,alongwiththatof
othersoftwareapplications,negatesthebenefitsoftheincreasedprocessingpower
affordedbynewIntelmicroprocessors.JohnNaughton,inacolumnfortheObserver,
describedthissituationas“IntelgivethandMicrosofttakethaway”(Naughton,2005).
Therelationshipbetweenhardwareandsoftwareisthereforeoneoftheprincipal
reasonsfortheconsumerlockintothePCupgradecycle.
However,customersrecognisethattechnologicaladvancesarebeingmade;theyknow
thatiftheywaitafewweeksormonthsthatPCsandtheircomponentswillexhibitboth
higherperformanceandlowercosts.Thisexpectationoftenleadsto‘leapfrogging’
behaviors,wherethecustomerdecidesnottoadoptaparticulargenerationof
technologywiththeanticipationthatthenextgenerationwillbeofgreaterperformance.
Thechallengefortheproducersistoconvincesuchcustomersthattheyshouldpurchase
thecurrentnewtechnologyratherthanthatwhichwillbecomeavailableinsixmonths.
Todothisrequiresthatthefirmsassistthecustomerwiththeirmigrationfromtheold
technologytothenewgeneration(Mohr,2001).
Intelachievesthisthroughcomponentandinterfaceinnovation.Thecomponent
innovationstrategyderivesfromthefactthatIntelmanufacturesandsellsarangeof
microprocessorsonthemarket;thisrangeiscontinuallychangingashigherperforming
microprocessorsarebeingaddedandthelowestperformingmicroprocessorsarebeing
removed.Thisallowsforthedifferentrequirementsofindividualadoptercategories.
Intelalsoinnovatesontheinterfacebetweenitsmicroprocessorandthemotherboard;a
newPCsystemmusthaveanewmotherboard,whichwillhaveoneofthelatestIntel
interfacesandhencemustuseoneofthenewestIntelmicroprocessors.Microsoft
directlysteersthemigrationpathofitscustomersbygraduallyphasingoutitscustomer
supportforpreviousgenerationsofoperatingsystemsandapplications.Indirectly,it
reliesonthefactthatusersrequirecompatibilitywithoneanother.
4.2.5Threatofentrytonewmarkets
Anothermeansbywhichtheplatformleadersusetheirdominantpositiontoshapethe
industryisthroughthethreatoftheirentryintoothersectorsoftheindustry.InAugust
1996,forexample,Microsoftannouncedthatitwasplanningtoenterthegraphicscard
market.Codenamed“Talisman”andbasedaroundaSamsungchip,Microsoft’sproduct
wasdesignedtofusetogetherwhatuntilthenhadbeenseparatetechnologies;graphics
accelerators,3D,MPEG,videoconferencing,soundandnetworkconnections.Itwas
scheduledtobeonthemarketinthefirstquarterof1997butbylate1997thegraphics
cardhadyettohitthemarket;Samsunghadbeentwicelateindeliveringthecrucialchip
andultimatelyfailedtodeliveritatall.Buttheprojectwasn’tafailure,asEdstromand
Eller(1998)explain:
“The fact was that Microsoft had done what it needed to do – ithad
upgraded the PC platform. Microsoft had scared the OEMs [original
equipment manufacturers] into building better graphics cards. Microsoft
couldwritenewsoftwarefortheboards,thenconsumerswouldbeforcedto
buyallnewhardwareandsoftwareiftheywantedthenewkillergraphics.
Microsoft would make money, the customers would get coolerga mes … It
wasbusinessasusualforMicrosoft.”(EdstromandEller,1998)
Theneedtomakeconsumersperceivethattheycanexperiencesomegreaterbenefit
fromthenewtechnologiesmotivatesMicrosoft’sactivities.AsSonycofounderAkio
Moritaputsit:“We must createproducts having newfeatures that customershavenot
expectednorhavehadanyknowledgeabout.Theseproductsandfeatures,whentheyare
created, must then be communicated to the customer so that he can understandwhat
benefits he can obtain”(Krass,1999).IntelandMicrosoftinvestheavilyinmarketing
becausecommunicatingthefactthatnew,moredesirableproductsareavailableisa
crucialcomponentinthestimulationofdemand.ThisisparticularlyimportantforIntel
becauseitsmicroprocessorsareinvisibletothePCuser;incontrast,usersdirectly
experiencethebenefitofMicrosoft’soperatingsystemsandapplicationsthroughthe
‘lookandfeel’ofthePC.
4.2.6TechnologicalobsolescenceinthePCindustry:Theupgradecycle
IntheprecedingsectionsanumberoftheissuessurroundingtheobsolescenceofthePC
havebeenexplored.Thesefactorscombinetocreatewhatistermedthe‘upgradecycle’,
acontinuousprocessinwhichconsumersfaceanongoingrequirementtoreplace
hardwarecomponents,operatingsystemsandsoftwareapplicationssothattheyremain
uptodateandcompatiblewithotherusers.Theplatformleadersofthisindustryare
abletosetadevelopmenttrajectorythattherestoftheestablishedindustrycanfollow,
whileintroducingnewproductswhichstimulateconsumerdemandforthenew
technologies.Wethereforeobservethatthesecomponentscombinetoforman
obsolescencestrategywhichprovidesameansforproducerstopursuesalesrevenuesby
releasingincrementallyimprovedtechnologiestoestablishedmarkets.
5.Implicationsforinnovationtheory
EpisodesinthedevelopmentofthePChavebeendescribedandanalyzedinthispaper.
Fromthisaccount,keyinsightshavebeengainedintotechnologicalobsolescence.
ExaminationoftheearlyPCindustryrevealedhowtheemergenceofadominantdesign,
theIBMPC,causedacascadeofobsolescenceintheindustryascompeting
microcomputerarchitectures,alongwithcomponentsandcomplementarytechnologies
dependentonthisarchitecture,weremadeobsoleteandledtoashakeoutoffirmsfrom
themarket.Later,inanalysisofthematurePCmarketweobservedhowleadingfirms
obsoletedtheirowntechnologiesbyinnovatingincrementallyandusedarangeof
strategiestodrawtheindustryandconsumersalongwiththem.Wediscussthe
implicationsforinnovationtheoryinthefollowingsections.
5.1Technologicalobsolescenceandcreativedestruction
Schumpeter’saccountof‘creativedestruction’describeshownoveltyarisesthroughthe
recombinationofexistingproducts,processes,materialsandorganisationalforms.This
introductionofnoveltechnologies,firmsandindustriesbringsabouttheobsolescenceof
theoldandisviewedasafundamentalcomponentinthecapitalisteconomicsystem.
WhileSchumpeterdescribedthedynamicthroughwhichchangeisbroughtabout,there
waslittleexplanationastotheprocessthroughwhichobsolescencearoseeitherby
Schumpeterorsubsequenttheorists.Conceptually,creativedestructioncanbeseenas
operatingacrossthespectrum,fromtheleveloftheproductandtechnology,throughto
thefirmandindustry.Thispaperhasbeguntodescribesomeoftheinstancesinwhich
thetechnologicalobsolescencegivesrisetochangesacrossthescale,atdifferentstages
oftheindustrialandproductlifecycle.
Themarket,asinthefamouscaseofVHSvs.Betamax,doesnotnecessarilyselectthe
besttechnologybutinsteadthebestmarketedandmostacceptableinnovation.TheIBM
PCbecamethedominantdesignbecauseitwasthetechnologywhichbestmetthe
performancerequirementsoftheindustryandbecausetheeasilyimitatedarchitecture
waseffectivelyanopenstandard.Itsselectionbroughtabouttheshakeoutand
obsolescenceofmanyoftheseincompatibletechnologies,alongwithanumberoftheir
constituentcomponentsandcomplementarytechnologies.Asaconsequence,firmswho
wishedtoremaininthemicrocomputermarketneededtoswitchtoarchitectures
compatiblewiththeIBMPCorwereforcedtoleave.
Thesubsequentshrinkageindiversitybroughtaboutuniformityintheshapeofthesingle
standardarchitecturewithtwodominantcomponentmanufacturers:Intelin
microprocessorsandMicrosoftinoperatingsystems.ThesefirmswerecentraltothePC
businessecosystem,withotherfirmsdependentontheoverallsuccessoftheindustry
fortheirownsuccess.Thiscoevolutionwasbasedontheabilityoffirmstoobsoletethe
previousgenerationoftechnologieswhichconsumershadadopted.Fortheplatform
leaders,theobsolescenceoftheirtechnologiesbecameamanagedprocessbasedon
economicimperatives.
ThecentralityofIntelanditsabilitytodictatethecentralsystemarchitecturecanbe
seenintheeffecttheobsolescenceofitsmicroprocessorshasthroughthesystem
architecture.Advancesmadeinmicroprocessordesignwereusuallyaccompaniedby
changesinthepinconfiguration,theinterfacebetweenthemicroprocessorandthe
motherboard.Thischangesetoffacascadeofsystemicobsolescence.Thechangetothe
microprocessormotherboardinterfacecausedthetechnologicalobsolescenceof
motherboardswiththeoldinterface.Butthenewmotherboardsoftenhadnew
interfacesfordynamicrandomaccessmemory(DRAM),thegraphicscardand
peripherals.Theintroductionofnewmicroprocessorsbroughtaboutthetechnological
obsolescenceofmotherboardswithincompatiblemicroprocessorinterfacesandthe
subsequentobsolescenceofcomponentsincompatiblewiththeothernewinterfaces.
Theobsolescenceofcoretechnologiesleadstotheobsolescenceofitscomponentsand
complementarytechnologies.
5.2Selectionenvironmentsforemergingtechnologies
Itispossibletosumupthewayobsolescenceemergedandshapeddevelopmentsby
lookingatthe‘selectionenvironment’foremergingtechnologies.Theselection
environmentinwhichthefirstmicrocomputersoriginatedwasconducivetothe
generationofvariety.Existingcompetitiontooktheformofhighcostminicomputers,
workstationsandlimitedaccessmainframesatoneendofthespectrum,withlower
functionalitytypewritersandelectronicwordprocessorsattheother.Experimentation
waspossible,withhobbyistsproducingthefirstcompetingdesigns.Butasthese
hobbyistsincreasedthesophisticationofthehardwareandsoftwaretheydeveloped,
theybroughtabouttheirownobsolescence.
Theadvancesmadequicklyexpandedthemarketbeyondtheoriginalhobbyistusers.
Attemptingtoaddresstheneedsofhomeandbusinessuserswholackedthetechnical
proficiencyofthehobbyistbroughtaboutthefirstshiftinselectionenvironmentinthe
emergingPCindustry.Theinitialmicrocomputersbecameobsoleteasentrepreneursand
firmsenteredthemarket.Thesenewentrantscouldenvisionthecommercial
opportunitiesthatthisnewtechnologyofferedenteredandofferednewtechnological
configurationstomeettheseneeds.Butasmarketpenetrationandcompetition
increased,theincompatibilityoftheseproprietarysystemsbecamewastefulandfrom
thisfermentofexperimentationasinglestandardwasanefficientoutcome.The
emergenceoftheIBMPCasthedominantdesignbroughtaboutanothershiftinthe
selectionenvironmentwithhardwareandsoftwarecompatibilitythekeydeterminant.
Thisbroughtabouttherapidobsolescenceofthemajorityofincompatible
microcomputerarchitectures,withincreasinglymarginalmarketshareforthose
incompatiblestandardswhichsurvived.
Theselectionofthedominantdesigncreatedaselectionenvironmentconducivetothe
retentionandpropagationoftheIBMPCandthefirmsproducinghardwareandsoftware
forthissystemarchitecture.Astheindustrymatured,competitivepressuresbrought
aboutashakeoutinthenumberoffirmsproducingIBMcompatiblePCs.IBMlostits
architecturalleadership,withIntelandMicrosoftbecomingplatformleaders.Thehigh
levelofmarketpenetrationbroughtaboutafurtherchangeintheselectionenvironment
asitbecamenecessarytostimulatetherepeatcustomofusers.Thisledtothe
developmentofapplicationsthatrequiredhardwarewithhigherperformance,so
necessitatingtheusertoupdatetheirhardwareandsetthe‘upgradecycle’inmotion.
Thiscycleispartofacoevolutionaryprocessbetweenhardwareandsoftwareand
betweentheproducersofthishardwareandsoftware.Ithasbecomeanessential
dynamictoanindustryinwhichtheabilitytoobsoleteiscrucial.
ThematurePCindustrycanbeviewedasacomplexecosysteminwhichfirmsare
mutuallydependentononeanotherforthecontinuedgrowthoftheecosystem.The
harddiskdriveindustryisonemarketthatwasbroughtintothisindustryduringtheearly
emergenceoftheIBMPC.Despitemarketsinotherindustries,themajorityofharddisk
drivesaresoldasacomponentinnewPCs.ThePCgavethesmallerharddiskdriveform
factorsanicheforgrowthandthesuccessofthetwohavesincebeencloselyentwined.
5.3Technologicalandphysicalobsolescence
ThistechnologicalobsolescenceofPCsystemsandcomponentscontributestothe
physicalobsolescenceofPCs.ThiswasapparentintheearlystageofthePCindustry
lifecyclefollowingtheshakeoutofcompetingtechnologies.Thoseconsumerswho
purchasednonIBMcompatiblePCsquicklyfoundthemselvesusingasystemforwhich
littlenewsoftwarewasbeingproduced,withthispromptingtheneedtoswitchtothe
IBMstandard.Meanwhile,inthematurePCindustry,producerscreatesoftware
applicationsthatrequirePCsystemswithhigherperformance.Whenconsumersseethe
newpossibilitiesthatthesenewapplicationsoffertheyrequirenewhardwareforits
operation.Iftheconsumerisinclinedtowardsupgradingtheirsystemtheyarefortunate
ifthenewcomponentsavailableonthemarketarestillcompatiblewiththoseinhis/her
system.Inthemajorityofcasesthepaceofinnovationhasmeantthattheimportant
interfacestandardshavechangedandthatthereisnocompatibilitybeentheoldsystem
andthenewcomponents.Inasimilarveintothemannerinwhichtechnological
obsolescenceoperatesforasinglecomponent,consumersattemptingtoupgradetheir
systemsthenfindthattheyneedtoreplaceseveralcomponentsandinturndiscoverthat
purchasinganentirelynewsystemisanattractiveoptionineconomicterms.
Theconsequenceofthisinnovativeactivityandtechnologicaladvanceisthereforenot
onlytechnologicalobsolescencebutalsotheirsubsequentphysicalobsolescence.Thisis
notaunidirectionalprocessbutisinsteadpartofafeedbackprocessinwhichthemarket
obsolescenceandphysicalobsolescenceoftechnologiesareinterconnected.Thiscanbe
seenintheextremecasesofproductadoptercategories.Theearlyadoptersofnew
technologiesmaketheirexistingproductsphysicallyobsoletewellbeforethemarket
obsolescenceofthosetechnologies.Meanwhilemanylaggardswillholdontothe
technologiespossess,makingthemphysicallyobsoletewellaftertheirmarket
obsolescence.Intheformercase,thereadinessoftheearlyadopterstoadoptthenovel
technologiesisanearlysignalfortechnologicalobsolescence.Inthelattercase,the
reluctanceofthelaggardstomaketheirproductsphysicallyobsoleteactsasaninertial
signaltothemarketandpromptsfirmstocontinueofferingsupportservicesforlegacy
productsoftenlongaftertheobsolescenceofthatproduct.
5.4Furtherimplicationsforinnovationtheory
Theargumentsputforwardinthispaperfurtherindicatetheneedforasystemsview
whenattemptingtounderstandprocessesassociatedwithtechnologicalinnovationand
industrialchange.Decomposingtheinnovationprocessintoitsconstituentshasledto
conceptualfragmentationandafocuspredominantlyontheearlystagesofthe
technologylifecyclewithalossofalongertermperspective.Throughcombining
technologicalobsolescenceandcoevolutionaryperspectives,animproved
understandingofthefullinnovationcycleisobtained,aswellashighlightinganumberof
implicationsforthestrategicmanagementoftechnology.
Thisapproachprovidesinsightintotheinterlinkagesbetweentheobsolescenceof
productsandtechnologiesandthesubsequentemergenceofnoveltyintheformofnew
products,technologiesandindustries.Theseinterlinkagescanhaveprofoundeffects
withinbusinessecosystemssuchasthatofthePC.Thebusinessecosystemconsistsof
interdependentfirmswhosefinanciallongevityisinpartdependentonthesuccessofits
coretechnology.Theobsolescenceofthiscoretechnologycancreateshockwaveswithin
theseindustries,impactingonthosefirmsproducingcomponentsandcomplementary
productsandservicesforthetechnology.Theobsolescenceperspectiveproposed
highlightsthelinksbetweengenerationsofinnovationsandthecyclicalcharacterof
technologicalchange.Byidentifyingtechnologicalobsolescenceasinseparablefrom
technologicalandindustrialchange,wegainmoreunderstandingofthedestructive
elementincreativedestruction,withoutwhichfurtherchangeisinhibited.
WhilethispaperhasinvestigatedthePCsectorasacaseexemplar,theprocesses
highlightedinthispapercanalsobeidentifiedinotherindustries.Theinsightsgained
fromthePCsectorcanbeappliedtoothercomplextechnologieswhichconsistof
separatehardwareandsoftwarecomponentsfromdifferentproducers,alongwiththose
inwhichnetworkeffectsareoperative.Fortechnologiessubjecttonetworkeffects,
positivefeedbacksencouragetheformationofecosystemsaroundtheproductionand
consumptionofdevicesconformingtothedominantstandardforinteroperability.
Accordingly,theseinsightscanbedirectlytranslatedtoothernetworkedelectronics
industriesinwhichbusinessecosystemshaveformed,suchasmobilephones,video
gamesconsolesandopticalmediastorage(DVDandBluray).Similarly,theobsolescence
processesassociatedwiththeemergenceofadominantdesignarelikelytobeseenin
otherindustrieswhereasinglestandardhasemerged,suchasthoseinvestigatedby
Utterback(1994).
Furthermore,theapproachtakeninthisinvestigationalsohighlightstheneedforfirmsat
thecentreofbusinessecosystemstomanagerelationshipswithcomponentsuppliers
andproducersofcomplementaryproductsandservicesduringthemigrationfromone
innovationgenerationtothenext.Fromastrategicmanagementperspective,aplanned
technologicalobsolescencestrategyisonemeansthroughwhichfirmscanretain
competitivenessandprovidetherevenuesnecessarytofundsubsequentroundsof
innovation.Inaddition,awelldefinedtechnologyroadmapisonemeansthroughwhich
technologicalobsolescencecanbemanagedandthechallengeofbringingthebusiness
ecosystemforwardinstepwiththecoretechnology.Whilebeingpartofthedominant
technologywillleadtogreaterfinancialsuccessfortheproducerscontributing
componentsandcomplementarytechnologies,thechallengeisalsotoavoidlockinto
thesingletechnologybecausetheobsolescenceofthecoretechnologycanleadto
systemictechnologicalobsolescencethroughouttheentirebusinessecosystem.
6.ConcludingRemarks
Thefocusontechnologicalobsolescencehashighlightedthemanyinterlinkagesbetween
theendofthetechnologylifecycleandtheinitiationofsubsequentcycles.This
investigationhasbeguntounpacktheseinterlinkagestorevealhowobsolescence
createsandreflectsasynchroniesbetweensupplyanddemand,givingrisetonew
opportunitiesforentrepreneurialresponseandvaluecreation,inturnbringingabout
marketselforganisation.Technologicalobsolescenceisrevealedasacoevolutionary
processoperatingacrossthescale,fromtheleveloftheproductandtechnologytothe
firmandindustry.Thepaperhasmadeapreliminaryattemptatintegratingtheissueof
technologicalobsolescenceintoinnovationtheory,updatingtheconceptofcreative
destructioninthelightofnewconcernsanduncoveringneglectedlinkagesbetween
technologicalobsolescenceandexistingtheories.
Operationalisingsuchconceptsforpurposesofquantificationwouldprovide
opportunitiesforfurtherresearch,alongwithexaminationoftheinterrelationship
betweentechnologicalobsolescenceandthephysicalobsolescenceofproducts.Such
studieswouldprovideacontributiontounderstandingthemechanismsthroughwhich
technologicalobsolescenceinfluencestheconsumer’sdecisiontodiscardexisting
products,creatingphysicalobsolescence,alongwiththemannerinwhichthephysical
obsolescenceofproductscreatesnewopportunitiesfornewindustrialactivityto
emerge.
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