J.P. Eggers just published an article that looks at the
outcome of the technology race between LCD (liquid crystal display) and plasma
display technology in the flat screen market. We know the broad story of how
the market has developed over time: both technologies were tried initially,
then LCD became dominant, and then the tables turned so that plasma is now
resurgent. What the paper adds is an interesting take on what happened to each
firm. It is useful knowledge for managers interested in how to place bets on
competing technologies, and it also tells a lot about how organizations make decisions.
Firms that bet only on plasma early on did more poorly in
the technology race as LCD became dominant, as one would expect from them
having bet on the wrong technology. Firms that developed both technologies at
once also did more poorly than those that bet on LCD only, again a reasonable result
given that specialization is better if it is in the right decision. But here is
the big surprise: when plasma re-emerged as the better technology later, the
firms that entered with plasma technology initially still did worse than those
that entered with LCD.
How is that possible? If knowledge stays in the firm, they
should have been able to use the early investment to recover. But what seems to
have happened is that managers learnt too much from the initial negative
experience with plasma. Not only did they learn that plasma was the wrong
choice early on, but the experience of placing the bet on plasma created
greater skepticism either against that technology (even as it improved), or even
against the effectiveness of research and development in general. Clearly they were over-learning from this experience, and that held back the firm technology development.
The disturbing
lesson is that choosing the right technology has consequences beyond the first
technology generation, but it is still necessary to do so before the advantages
are known (late entrants also did poorly). So the spoils really belonged to the
victors, who not only enjoyed LCD dominance but were also able to change to
plasma with greater ease than the original plasma firms.
