The tortoise and the hare2003

This paper investigates the dynamics of technological adaptation and compares the short and medium term effectiveness of separated (e.g., spinouts, autonomous ventures) vs. integrated approaches. Our research is based on an empirical study of the response of traditional firms to the rapid diffusion of ecommerce, and includes extensive qualitative and quantitative evidence. Our survey data on financial performance and survival for electronic commerce businesses launched by incumbent retailers is complemented by detailed case studies of two matched-pairs of firms adopting electronic commerce. Our data suggests that highly differentiated innovating approaches appear to provide early signals of effectiveness, but tend to encounter difficulty in scaling and surviving in the longer term. Organizations that instead mount integrated responses, merging new technologies and business models with traditional skills and capabilities, obtain critical advantages and superior performance in the longer term. The case studies shedsome light on the drivers of these differences, and show that while integrated approaches may be more difficult initially, and may not enable firms to act as quickly as their more separated competitors, they will tend to create a more powerful, efficient, and sustainable response. Separated approaches, if used, should need to include extensive planning for the eventual reintegration of the innovating organization.