Alva Taylor uncovers the skills firms need to innovate across technological divides.
A wave of technology washes over the world and suddenly your film camera is obsolete. Then another one comes along and your Walkman is a quaint artifact. It’s an oft-told tale, one in which existing firms are hampered by their old knowledge. But “what’s missing in the story,” says Tuck associate professor Alva H. Taylor, “is that those disruptions are pretty rare.”
More frequently, technological innovations are generational in nature—tweaks that don’t herald revolutions so much as, say, faster processing speeds or more memory. Generational changes are underappreciated because they’re often an indicator of long-term success, not short-term survival. “If you miss a disruptive change, you go out of business,” says Taylor. “Miss a generational change and you go from being number one in your market to number six or seven.”
That is still a significant change and one that represents a challenge to businesses that Taylor explores in new research on the video-game industry. In this ecosystem, there are three kinds of animals: console manufacturers, game developers, and game publishers. In the early days, console manufacturers made most of the games, but as consoles became more widespread, video-game development became a viable stand-alone business and developers flourished alongside console makers.
Taylor selected this industry because the generational cycle between new consoles usually lasts five or six years. During that time, game developers must continue to produce new games that work on the current consoles while remaining flexible enough to adapt old games, or develop new ones, for the next console generation. To do this well, developers must divide their attention among different platforms, learn to use new technology to improve the gaming experience, and link valuable old knowledge with the new.
Taylor’s study concentrated on the years 2001 through 2008, during which each of the major console makers introduced new platforms yet no manufacturers entered or exited the market. Taylor culled video-game retail sales figures and narrowed the eligible new games down to 1,884 original developments from a total of 4,449 titles released. Of the 1,884 eligible games, he found that 1,074 were released within a generational cycle and 810 were introduced across generational cycles (within two years of the consoles’ initial release).
To draw out patterns from the data, Taylor designated variables that would affect innovation competency. Some of these included “experience in generational change,” the depth of knowledge of game software, technical knowledge of the platforms, platform ownership, and competition among game genres and platforms.
Taylor found that “ambidextrous” firms were best at generational innovation—that is, companies that can recognize and stay excellent at the aspects of their skills that retain value while they learn new technologies and business processes. It is important for companies to evaluate not just which of their capabilities are distinctive but also which are enduring. Organizations should identify and invest in capabilities that will retain value across multiple foreseeable futures, providing them with a strong core to link with the new knowledge.
In terms of platform transitions, the winning companies are those that cultivate the skills that keep them nimble and responsive to change. These companies, says Taylor, keep employees from becoming locked into one way of doing things and stay current on industry trends. Some try to buy this knowledge by acquiring other firms, but Taylor prefers that companies do the continuous work that keeps employees sharp. “One of these things includes becoming really good at what you do,” he says. “Once you know an entire genre of games inside and out, it’s much easier to take the genre to a new platform.”
Taylor’s study uncovered one more intuitive yet difficult rule: competition is good. Often, he says, companies avoid moving into areas where others already exist, but that only makes them slower and less capable. “Don’t run from competition,” Taylor admonishes. “In fact, when things are changing, run toward competition. Go where the fire is hot. Your people will be better for it.”
A Taylor, “Innovating Within and Across Technological Generations: Learning and Linking,” forthcoming