Strategic Innovation

Abstract

In spring 1902, Jim Penney opened his first drygoods store in Kemmerer, Wyoming, and began his attack on the big retail chains of the time, including Seats and Woolworth, which date back to 1886 and 1879, respectively. By 1940, J.C. Penney had grown to 1,586 stores and annual sales of $302 million. • In January 1936, Lever Bros., a subsidiary of Unilever, introduced a new food product in the U.S. market, a vegetable shortening called Spty. The new product went up against Procter & Gamble's established marker leader, Crisco, which had been introduced in 1912. Spry's impact was phenomenal: in a single year, it had reached half the market shate of Crisco. • In the early 1960s, Canon, a camera manuiacturer, entered the photocopier market — a field totally dominated by Xerox. By the early 1980s, having seen such formidable competitors as IBM and Kodak attack this same market without much success, Canon emerged as the market leader in unit sales. Today, it is a close second to Xerox. • In 1972, Texas Instruments, a semiconductor chip supplier, entered the calculator business — a field already occupied by Hewlen-Packard, Casio, Commodore, Sanyo, Toshiba, and Rockwell. Within five yeats, TI was the market leader. • In 1976, Apple introduced the Apple II in direct competition to IBM, Watig, and Hewlett-Packard in the professional and small business segment and Atari, Commodore, and Tandy in the home segment. Within five years, Apple had become the market leader. • In 1982, Gannett Company Inc. introduced a new newspaper into a crowded field of 1,700 dailies. By 1993, USA Today had become a top-selling newspaper with an estimated 5 million daily readers. • In 1987, Howard Schultz bought Starbucks Coffee from the original owners. In the next five years, he transformed the company from a chain of 11 stores to some 280 stores in 1993. Sale tevenues grew from $1.3 million in 1987 to $163.5 million in 1993. • In the late 1980s, Yamaha tried to revitalize its declining piano business by developing digital technology so customers could either record live performances by the pianists they'd chosen or buy such recordings on diskettes and play the same composition on their pianos. Sales in Japan have been explosive. These are certainly nice success stories, but there is more to them than that. The common theme undetpinning all these accounts is simple: the companies succeeded dramatically in attacking an established industry leader without the help of a radical technological innovation. This feat is not easy. Existing academic evidence shows that attacks on established leaders usually end up in failure — notwithstanding recent wellpublicized cases of market leaders, such as IBM and General Motors, losing big to new competitors.' A series of studies show that the probability of a firstranked firm in a particular industry surviving in first place is about 96 percent — almost a certainty.' For the second-ranked firm, the probability of survival is