Hybrid strategy leaves auto industry leaders playing catch-up, professor says

D’Amore-McKim School of Business Jean C. Tempel Professor of Entrepreneurship and Innovation Fernando Suarez, and his recent MIT Sloan Management Review article focused on the “hybrid trap” and the future of innovation were featured in News@Northeastern.

Published

April 20, 2018

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How effective will Toyota’s Prius be over time? What about the future of other electric cars? Fernando Suarez, Northeastern University’s Jean C. Tempel Professor of Entrepreneurship and Innovation, explores “the hybrid trap,” in his recently published MIT Sloan Management Review article.

Suarez uses the Prius as a model for what can happen when industry leaders follow a hybrid strategy. He highlights the downfall – that it can cause a forced game of catch-up with more aggressive startups.

“Most established corporations follow the hybrid approach because it gives them peace of mind,” said Suarez. “It allows incumbents to convince themselves that they’re responding to technology-driven transformation in their industry when, in fact, they’re losing ground.”

General Motors (GM) released the first all-electric car 12 years before the first Tesla was released, the EV1. The release became a threat to GM’s gas-powered divisions, and was eventually pulled from the market in 2002. Although the technology failed then, it was picked back up by Elon Musk, and in 2003, Tesla was founded. It’s mission being to create the vehicle of the future – an electric car.

Suarez believes that established companies often make the mistake of approaching new technology from the same perspective as the existing technology.

“They fall back on learned patterns, which slows development,” he said. “When are serious about going the route of new technology, you have to rethink all of your designs and processes.”

Suarez offered other examples of the hybrid trap, including the bankruptcy of Kodak in 2012 and the breakdown of Blackberry, both one-time industry leaders. Digital photography ended Kodak’s control of the market and their popularity with consumers.

“Fearing a negative impact on its highly profitable film business, Kodak introduced a hybrid product, the Photo CD, which flopped,” said Suarez. “It was bulky, expensive, and did not optimize either technology. When Kodak finally joined the digital revolution in the late 90s, it was too late.”

Suarez is currently building off the theories of Harvard Business School Professor Clayton Christensen that are published in his book, The Innovator’s Dilemma. Christensen coined the phrase “hybrid innovation” as a way to describe the way large companies combine new technologies and existing products to extend the life of products.

Although hybrid traps can occur, Suarez believes it’s not all bad.

“If you’re aware of the trap, then you’re more likely to experiment fully with the innovation,” he said. “It’s not about betting the house on new technology. But if you go hybrid as a way to make your company feel comfortable, that’s the trap. Unfortunately, that’s what most incumbents do.”

Read more on News@Northeastern.