Get Ahead by Betting Wrong

JP Eggers

By J.P. Eggers

It can be dangerous to be right at the outset.

By J.P. Eggers

Companies that invest heavily in R&D are often torn between emerging technologies, wondering which will win in the market and is therefore the one to develop. (The classic example is VHS versus Betamax video recorders.) Conventional wisdom suggests that they pay dearly for getting it wrong. But my research shows that betting on a losing technology and then switching to the winner can position a company to come out ahead of competitors that were on the right track all along.

Much of my investigation centered on flat-panel computer displays. I examined company and product data for 55 firms from the 1980s through the 2000s. Initially, companies pursued either plasma screens or liquid crystal displays. LCDs turned out to be the right call, but several firms with an early focus on plasma, including IBM, ended up as the top LCD performers. Why? I believe that switching to a new technology often forces companies to rapidly ascend a steep learning curve, and they can then use their knowledge to beat competitors whose learning proceeded more slowly.

My study encompassed detailed data on 694 products, 30 years of financial data, thousands of industry patents and scientific publications, interviews with more than 25 longtime industry veterans, and dozens of internal strategic planning documents from one particular firm.

Read full article as published in Harvard Business Review

J.P. Eggers is an Assistant Professor of Management and Organizations.