Observing recent opinions in the national mass media associated with the economic growth, there appears that the paradigm in creating sustainable growth has been changing.
The new dogma of exploiting knowledge has become a factor mandatory to make a country stay within the circle of economic competences rather than just relying on foreign direct investments.
Of course this idiom is somewhat different from the neo classical economic mainstreams drawn as old as the Adam Smith and David Ricardo.
The basic tenet of this new growth theory is about technological changes. It is believed that with scarce resources and the unexpected population growth, the Malthusian theory will face a serious threat if no radical changes are made.
With technology, the limit to grow now has its room to expand. Consider the use of biotechnology and modern agricultures in cultivating a large number of seeds. These were not in mind many decades ago where lands were required to expand to be able to plant more seeds.
However, what make it interesting are changes in the industry level because of the impacts technology offers.
Well, let us see the simplest case. How many of us now see the typewriter in our office? Or how many of us use calculator instead of using Exce or our mobile phonel?
Technological Changes
Technological changes may have not been thought as threats to many incumbent firms until they suddenly realize that their time is running out and there are little or even nothing to do other than just becoming thrown away from the market.
A simple example, some of us may still remember those walkmans with their lace hanging around our neck with the headphone in our ears.
Have you seen it lately?
What about the golden era of Betamax and VHS video? I have never seen a video rental in the city other than cheap pirate DVDs and reasonable price of Chinese DVD players which can play us all (that what they say) DVD movies, genuine or pirate.
Though it emerges without our will, yet we buy these products and fill the company’s pocket producing such gadgets. They become more prosper through innovative products.
Not to Innovate Problems
At the same time, incumbents resisting to innovate are, time and again, struggling to regain their market share. Although they may have seen the potential threat of new products, because of their unwillingness to invest in new product developments they are facing market declines.
Make it worst, they don’t acquire necessary knowledge to extend their products. The incumbent stays with their comfort zone thinking that their specialties and comparative advantages are enough to retain a strong market share.
This is what called as the “Not to Innovate Here” problems. Many incumbents are lack of perceiving even the weakest signal that may change the direction of the market demand.
IBM did not think the threat from personal computer (PC) and stayed in producing main frame computers just to realize that PCs were becoming dominant throughout the 1980s and 1990s.
Why? Because they believed they had their market base so strong that even the smallest change in the computer industry was ignored.
Another reason is because they had a solid distribution network that they were ignoring a new channel of distributing computers through retailers.
Interestingly, the one that started innovative ideas and capitalized them to their benefits made the same mistake with the ones they outperformed.
When Yahoo emerged as a new browser replacing Netscape and successfully outperformed Internet Explorer, no one would have thought that this company would suffer from competition.
Years later, Google dominates the information economy with its arsenal and now they are capitalizing their market share while Yahoo can only see Google's progress wondering why their market was slipped.
To stay competitive one must innovate continuously. Technology is changing and the market is competing. Once the market saturates, companies cannot stay competitive just by relying on low cost products. History has it that the one that comes up with innovative products and processes will sustain longer in the industry.
