Quantum Leap of Faith: Reviving Classics

When New Technologies Emerge, a Bold Retreat May Be the Best Option for Old Technologies

In an era where new technologies are constantly emerging and disrupting existing markets, many companies struggle to adapt. Some may choose to transform their business models to keep pace with the changes, while others may try to double down on their existing technologies in the hopes of staying competitive. However, a third option - retreat - is often overlooked as a viable strategy for old technologies.

A bold retreat, also known as a "niche retreat," involves abandoning the main market and seeking out niche areas where the old technology still has an advantage. This approach can be seen in the success stories of companies such as Linjett, Continental, and StorageTek, which found new life by focusing on specific markets where their technologies remained relevant.

When formulating traditional strategies, a bold retreat should always be considered. In this way, managers can avoid taking excessive risks by overestimating their own strength and blindly competing with new technologies. At the same time, a bold retreat can provide valuable time and resources for a company's real transformation - especially during an economic downturn, extending the profit cycle of the old technology is often crucial.

The arrival of new technologies not only means increased competition but also a change in the way of competition. The value propositions provided by new and old technologies do not completely overlap. Therefore, companies do not have to be persistent in competing head-on with new technologies in the overlapping areas. When facing the pressure of technological substitution, managers should think about a different question: "What needs have been overlooked? After the emergence of the new technology, have we discovered new unique values in our products or services?" These overlooked areas are often the niches where the old technology can take root and thrive.

For example, before 1969, watches were just watches - there were expensive watches, cheap watches, manually and automatically wound watches, calendar watches, and many other categories, each with its own customers. All these watches were driven by mechanical movement systems, and an important indicator for evaluating watch functions was accuracy. In 1969, the quartz watch was introduced, with ten times better accuracy and a much lower price. Within less than a decade after its introduction, the quartz watch became the mainstream watch technology. Mechanical watch manufacturers were faced with two obvious but unappealing choices: bear a high degree of uncertainty and try to transform to produce quartz watches (even though they lacked the relevant technology), or redouble their efforts to improve the price and function of mechanical watches, which could only narrow the functional gap with quartz watches but not completely eliminate it.

Companies that truly understood the market changes caught a key turning point: the emergence of the quartz watch made consumers realize for the first time that "a watch doesn't have to be mechanical", and also made another group of consumers realize that "what they really love is the mechanical aspect itself". Therefore, these mechanical watch manufacturers chose to retreat from the "time-keeping function" to the "craftsmanship value". They redesigned the product structure, no longer hiding the precision components in an opaque watch case, but allowing the mechanical beauty of the movement to be seen and appreciated through a transparent case back, a large balance wheel, and a complex tourbillon.

This market dynamic also determines whether other old technologies can survive, and many of these old technologies do not occupy the high-end part of their respective markets. Dot-matrix printers perform better than laser printers in many industrial applications because their print heads are less sensitive to dust, vibration, and temperature changes, and they can print thick multi-layer forms. Similarly, pager networks are still very successful in the healthcare and emergency service markets because pagers do not generate transmission signals like mobile phones, which can interfere with medical equipment.

During our research, we observed various retreat strategies: up-market, down-market, mid-market, and a combination of these strategies. We couldn't find a simple formula to determine which strategy is the best. Managers must try to find all the possible safe havens, evaluate the scale of these business opportunities, the resources required to utilize them, and judge whether these opportunities are sufficient to make the business reach an acceptable scale.

In fact, a retreat may not always be feasible for old technologies to make a bold retreat, and it's even less likely to be the most appropriate choice. However, it's an option that must be considered when reviewing strategies. If a company retreats to its existing niche or enters a new market, it may continue to operate successfully, although perhaps on a smaller scale than before. Such a market position can serve as a safe haven for the company to regain strength and wait for new growth opportunities.

However, in any case, a retreat must be carried out boldly, before losing the technology war and exhausting the company's resources. And it must be carried out before the encroaching new technology takes root and thrives, causing a crisis for your business. By doing so, you can avoid a complete failure.

In conclusion, when new technologies emerge, old technologies often have a third option - retreat to those niche areas where they still have an advantage and let the old technology continue to play its value in the niche market. This approach can be seen in the success stories of companies such as Linjett, Continental, and StorageTek, which found new life by focusing on specific markets where their technologies remained relevant.

This article is from the WeChat official account "Harvard Business Review" (ID: hbrchinese), author: HBR-China, editor: Shi Qingjing. Republished by 36Kr with permission.