Wednesday, June 25, 2008

Cognitive Inertia

How did Kodak respond to the threat of 'digital Camera' in 1980's ?What factors distinguish successful firms from unsuccessful firms?

It’s a common observation that many firms, especially large firms, are limited in their tendency to exploit the abundance of lucrative opportunities that surface from within the firm. As a result of the incumbent firm’s failure to support exploitation of these opportunities, some intra-preneurs are encouraged to become entrepreneurs by founding a start-up organization. In many a cases, founders of these new firms would have preferred to exploit their entrepreneurial discovery within their previous firm, given sufficient management support and resources.

So what went wrong? Research suggests that cognitive inertia is one powerful explanation as to why established firms are not as innovative as young, less established firms. Gladwell throws in a very interesting perspective to this.

It might be worth the effort to understand why most of the organisations,of today, are struck up in 'time-wrap'.For example, Kodak's management suffered from 'confirmation bias'. i.e. What has worked for us in the past will work for us in the future!  Nokia too is the victim of this bias and is fast loosing out to     Apple in Mobile devices. 

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