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Although investing in new technologies often requires new business models and changes in organizational culture, firms frequently react in a static and rigid way in their attempt to change. This phenomenon is also referred to as inertia: “everything which remains in the stagnant situation or a constant movement unless an external force activates it“.

It seems that inertia against change is unavoidable in many firms. Inflexibility withholds firms to adapt to environmental changes which results in individual stagnancy and eventually inertia in the whole firm. Even for successful firms, resistance to change leads to difficulties in reconfiguring their business model. It is thus fundamental to overcome barriers to change in order to keep up with emerging technology trends (Moradi, Jafari, Doorbash  & Mirzaei, 2021).

Research shows that getting input for innovation processes from outside the firm (so-called innovation) is a way to overcome the negative impact of inertia by accelerating structural changes. Open innovation is defined as the “purposeful use of internal and external knowledge flows for increasing the speed of internal innovation and developing the market for external use of innovation.” (Chesbrough, 2003, p. 33-58). It’s thus a two-way stream to make innovation more effective and efficient. In fact, research shows that open innovation has a significant effect on business model innovation (Huang et al., 2013). They also found proof to suggest that open innovation has a significant positive effect on a firm’s performance (Huang et al., 2013).

A famous example of a firm that embraced open innovation is the business case of LEGO. After avoiding bankruptcy in 2003, LEGO decided to employ open innovation businesses on both the process and production levels to achieve various types of innovative output. Their strategy was based on three key pillars: 1) learning from external firms through interviewing, 2) learning from employees through feedback and interviewing, and 3) creating micro pilots to test LEGO’s capabilities and consumer needs (Lindegaard, 2014). Thanks to the successful implementation of open innovation, LEGO was able to create a pipeline of creative product ideas and a platform to keep their end customers engaged.

Sources:

Chesbrough, H. (2003). The Logic of Open Innovation: Managing Intellectual Property. California Management Review, 45(3), 33–58. https://doi.org/10.2307/41166175

Moradi, E., Jafari, S. M., Doorbash, Z. M. & Mirzaei, A. (2021). Impact of organizational inertia on business model innovation, open innovation and corporate performance. Asia Pacific Management Review, 26(4), 171–179. https://doi.org/10.1016/j.apmrv.2021.01.003

Huang, H.C., M.C. Lai, M.C. Lin, L.C. & Chen, C.T. (2013).  Overcoming organizational inertia to strengthen business model innovation: An open innovation perspective. Journal of Organizational Change Management, 26 (6) pp. 977-1002

Lindegaard, S. (2014) 3 Successful Open Innovation Cases: GE, Samsung and LEGO. [Online] Available from: https://www.linkedin.com/pulse/20141115202453- 46249-3-successful-open-innovation-cases-ge-samsung-andlego?trkInfo=VSRPsearchId%3A43274941430657186999%2CVSRPtargetId%3A 5939482912805122048%2CVSRPcmpt%3Aprimary&trk=vsrp_influencer_conten t_res_name.

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Emerging technologies and new business models influence the competitive landscape in an industry by redefining how value is created for customers and what they perceive as value. Technology and data are used to reorganize supply chains, to create new e-commerce channels, to leverage AI and predictive analytics. At the current rates of digitization in this fast-changing world, firms must invest in tech, processes, data, and people to become more flexible and faster, to make better decisions, and to meet new customer demands.

In his book “Adaptability: The Art of Winning in an Age of Uncertainty”, Max McKeown said, “All failure is failure to adapt, all success is successful adaptation” (McKeown, 2012). He explained that innovation, strategy, branding, marketing, and operations are useful but not enough. New business models are needed to seize an opportunity or to respond to competitors who already seized those opportunities. Adapting to customers’ changing value perceptions smarter and faster than the situation changes is fundamental to remaining competitive, to survive but above all to win.

However, the inertia to change turns out to be a substantial barrier for many incumbents. Many established firms are badly hit by changes. Firms fail to successfully exploit new opportunities not due to their inability to take action but to take appropriate action. As resistance to change is in our nature, they have a tendency to follow established patterns of behavior even in dramatic environmental shifts. Maintaining the status quo is a dangerous illusion. Although firms’ internal processes are hard to change and although investing in new (technological) resources implies tough trade-offs in resource allocation, firms need to overcome the everyday battle against inertia.

For example, since the strategic frames of the managers of Nokia were shaped by old ways of doing business which made them successful so far, they were not able to realize that the future of mobile phones was the touchscreen. They resisted the touchscreen revolution. It’s surprising that Nokia was quite innovative and adaptive at first. In fact, they were the first to build a prototype of a touchscreen. However, inertia led to Nokia’s downfall (Surowiecki, 2013).

Sources:

McKeown, M. (2012). Adaptability: The Art of Winning in an Age of Uncertainty (1ste edition). Kogan Page.

Surowiecki, J. (2013, September 3). Where Nokia Went Wrong. The New Yorker. https://www.newyorker.com/business/currency/where-nokia-went-wrong