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www.hbr.org

When a new technology

emerges, incumbents frequently
try—unsuccessfully—to either
Bold Retreat
leap to it or defeat it. Here’s a
A New Strategy for Old Technologies
third, often superior, option.
by Ron Adner and Daniel C. Snow

Included with this full-text Harvard Business Review article:

1 Article Summary
Idea in Brief—the core idea

2 Bold Retreat

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Bold Retreat
A New Strategy for Old Technologies

Idea in Brief
Old-technology companies often respond
to the arrival of a new technology either by
fighting it or by trying to make a transition
to it. For many companies, that’s a losing
battle. Their best option, surprisingly, may
be to retreat boldly.

There are two types of bold retreats: re-

trenchment to a niche of the traditional
market, where the old technology has an
advantage over the new one in addressing
customer needs, and relocation to a new
market, where the old technology is the
inherently superior offering.

Like a transition to a new technology, a

bold retreat requires significant organiza-
tional change. That includes revamping
your cost structure and your talent base,
not to mention selling the very idea of
“retreat” to your internal stakeholders.
COPYRIGHT © 2010 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

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 For the exclusive use of U. Ganeriwala, 2022.

When a new technology emerges, incumbents frequently try—

unsuccessfully—to either leap to it or defeat it. There’s a third, often
superior, option.

Bold Retreat
A New Strategy for Old Technologies

by Ron Adner and Daniel C. Snow

A superior new technology emerges on the ho- proved print quality and introduced new fea-
rizon, threatening your existing business. Do tures, such as multiple picture formats and
you simply follow conventional wisdom and index prints, in a new cartridge-based format.
COPYRIGHT © 2010 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED.

strive to make a seamless transition to the new However, such last gasps usually only post-
technology? All too many companies can’t pone the day of reckoning. The superior tech-
admit to themselves that they actually don’t nology almost always wins in the end. Manag-
have the wherewithal to make that transi- ers of old-technology firms who try to delay
tion—and so they fail disastrously. the inevitable often waste resources and dam-
Some firms decide, of course, that they can’t age their companies.
or shouldn’t make the transition—perhaps be- In studying the history of technology transi-
cause they lack the necessary capabilities or fi- tions, we have discovered that companies that
nancial resources, or because they believe that depend on a mature technology have a third
the new technology isn’t really superior and option when a new technology emerges: They
can be defeated. So, they redouble their efforts can retreat to a defensible niche, where the old
to upgrade the old technology and in many technology has an advantage. Long after their
cases succeed in improving its performance. technologies were eclipsed in their core mar-
For example, manufacturers of electric type- kets, these firms still prosper. Linjett continues
writers responded to the rise of digital word to succeed with leisure sailboats despite the
processors by making mass-market machines dominance of marine engine power. Continen-
that were performance wonders, with spell tal maintains its business in piston engines for
checking, full-line erasing, and multiple fonts. private aircraft despite the dominance of jet
Chemical-film photography firms responded to turbine power in commercial aviation. And
the rise of digital cameras by developing the StorageTek has found a profitable niche for its
Advanced Photo System (APS), which im- magnetic-tape-drive technology—large-scale

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Bold Retreat

data archives—that it can successfully defend Consider watches. Before 1969, a watch was
from the disk-drive technology that has come just a watch. There were expensive watches, in-
to dominate the mainstream computer-storage expensive watches, manual and automatic-
market. winding watches, calendar watches, and many
These firms engaged in what we call a bold other categories that customers bought. All
retreat. The strategy is a retreat because the were powered by mechanical-movement sys-
firm cedes most of the established market to tems, and a key measure of performance was
the new, dominant technology and instead accuracy. In 1969, quartz watches were intro-
pursues less vulnerable positions. And it’s bold duced. They offered an order-of-magnitude in-
because the withdrawal is a proactive, strategic crease in accuracy—and at a much lower cost.
alternative to head-on competition with the Within a decade of its introduction, quartz
new technology. Linjett, Continental, and Stor- movement became the dominant watch tech-
ageTek extended the value of their compe- nology. Mechanical-watch makers faced two
tence base by transforming their market posi- obvious but unattractive options: Attempt a
tion; they retrenched within sustainable highly uncertain transition to produce quartz
niches of their traditional markets, relocated movement (even though they had little rele-
to other markets where the old technology vant competence in that technology) or redou-
might actually have an advantage, or both. ble efforts to improve the price and perfor-
A bold retreat should be considered rou- mance of their mechanical-movement devices,
tinely along with the more conventional strat- thereby merely narrowing, but not closing, the
egy options. It can help save managers from performance gap with quartz.
making an overly risky bet that their company Insightful firms, however, recognized a third
will be able to defeat, or make the leap to, a option. They realized that the rise of the
new technology. Or, if a company can realisti- quartz movement meant that for the first time,
cally pull off a transition, a bold retreat can consumers could choose between mechanical
help finance the move. In recessionary times, and nonmechanical watches. Or, to put it an-
profitably extending the lives of old technolo- other way, the introduction of nonmechanical
gies is especially important. watches made some consumers aware of their
Openly discussing a retreat is rarely easy or preference for “mechanicalness.” These watch-
intuitive for managers, in large part because it makers began redesigning their products with
runs counter to the notion that exemplary this segment in mind. One result was a shift
business leaders vanquish their competitors from the industry norm of hiding watch mech-
and grow their companies. And to be sure, re- anisms within an opaque case to making parts
treat is not always the best choice. It is, how- of the case transparent in order to show off the
ever, almost always a relevant option. Firms increasingly complicated, visually stimulating
that lack a structured process for considering mechanical movements.
retreat are unwisely excluding a valuable stra- Clearly, the niche of consumers who valued
tegic alternative. In this article, we examine the mechanical quality of a watch was smaller
how to recognize when a retrenchment to a than the broader watch market. However,
niche within your traditional market or a relo- these consumers were willing to pay a high
cation to a new market makes sense, and we price. And perhaps more important, this niche
discuss some organizational challenges to exe- was immune to attack from the purveyors of
cuting such moves. quartz movement.
Such dynamics govern the survival of other
Retrenching to Sustainable Niches old technologies, many of which do not oc-
Ron Adner (ron.adner@tuck.dartmouth A new technology does more than just present cupy the high ends of their markets. Dot ma-
.edu) is an associate professor in the more competition for an old technology. It pre- trix printers outperform laser printers in many
Strategy and Management Department sents a different type of competition whose industrial applications, because their print
at the Tuck School of Business at value proposition does not fully overlap with heads are less sensitive to dust, vibration, and
Dartmouth College. Daniel C. Snow the old-technology offer. So, instead of focusing temperature changes and because they can
(dsnow@hbs.edu) is an assistant on how to catch up in the overlapping areas, print thick, multilayer forms. Similarly, pager
professor in the Technology and you can ask, “What has been left unaddressed? networks still enjoy success in the health care
Operations Management unit at What has the new technology revealed about and emergency-services markets because pag-
Harvard Business School. our offer that we could not see without it?” ers do not generate transmissions that interfere

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Bold Retreat

with medical equipment in the way that cell option: finding a new market.
phones do. In all these cases, old-technology
firms found ways of leveraging the differences Relocating to a New Market
in performance between the old and new tech- Relocation involves using the old technology
nologies, rather than attempting to eliminate to solve either a new set of problems for the
them. same set of customers or the existing prob-
In our research, we have observed many lems of a new set of customers. It means ac-
types of retrenchment maneuvers—up-market, tively pursuing the new opportunities and
down-market, mid-market, and combinations abandoning old positions. (See the guiding
of these. No simple formula works for deciding questions in the sidebar “Relocation: Finding
which ones are best. Managers must work to New Markets.”)
identify all the potential safe harbors, to assess If these are such good opportunities, why
the size of these opportunities and the re- wouldn’t a company have pursued them dur-
sources required to tap them, and to determine ing the normal course of expansion, before the
whether they will allow the business to operate new technology came on the scene? The sim-
at an acceptable scale. (See the guiding ques- ple answer is that the new technology changes
tions in the sidebar “Retrenchment: Holding the business-development calculus for old
On to Old Segments.”) If it turns out that op- technology: The priority of normal diversifica-
portunities to retrench don’t exist or are too tion is growth, whereas the priority of reloca-
small to support the business, consider another tion is survival. So, opportunities outside the
traditional market that seemed insufficiently
attractive before the advent of the new tech-
nology may become a lot more appealing as
Retrenchment: opportunities in the traditional market disap-
Holding On to Old pear, especially if they provide a defensible ref-
uge. For example, programmable calculators
Segments have been largely replaced by computers in
Use these eight questions to guide your
business and science markets for solving com-
efforts to retrench an old technology.
plex problems, but they now thrive in the edu-
cation market, where their low price and port-
1. What elements of our value creation does
ability make them perfect for teaching
the new technology leave unaddressed?
standard graphing concepts. Similarly, local
(Think broadly—for example, about
pager networks are now widely used by restau-
performance, mode of delivery, service
rants to call patrons to their tables.
interaction, and so on.)
2. Which of our customers care about these A Bold-Retreat Case Study: Ultratech
elements? To understand how relocation and retrench-
3. If we were to focus on these unique ment can work in concert, consider the story
attributes, how could we further improve of Ultratech. The company was a successful
value creation for this customer? producer of 1x semiconductor lithography
4. If we could capture this segment, would
steppers, which help to transfer circuit designs
it be enough to sustain us—in terms of
onto silicon wafers. After a management buy-
revenues, margins, and differentiation from
out, resource constraints prevented Ultratech
the competition?
from following its peers in developing the next
generation of 5x steppers, which used complex
5. How would we need to change our
optics to reduce image sizes by a factor of five,
organization?
thereby enhancing printing resolutions. Rec-
6. What can we expect in terms of ognizing that 5x would soon outsell 1x technol-
competition? ogy in the core market, Ultratech’s manage-
7. Will our ecosystem of suppliers and ment made a bold decision: If the company
complementors be available to support this couldn’t afford to reinvent its technology in
move? order to compete in its existing market, it
8. How attractive is this option relative to
would maintain its existing technology and re-
our realistic alternatives?
invent its market position.

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Bold Retreat

Ultratech’s first move was to retrench in a Ultratech’s technology offered significantly

lower-end segment of the semiconductor wafer better resolution performance than the metal-
market, serving less-demanding lithography in-gap technology that was being used—and at
procedures. This was more challenging than it a competitive price. Although the 5x technol-
sounds. To make operations simpler, chip mak- ogy’s performance would have been even
ers had been using just one type of tool from more attractive to drive-head producers, its
just one supplier throughout their manufactur- high price point excluded it from serving the
ing line, even though many production steps disk-drive market.
did not require the most advanced perfor- In effect, Ultratech decided not to participate
mance. Without a 5x product, Ultratech knew in a technology race that it was sure to lose. In-
that it couldn’t compete on this basis. Instead, it stead, it boldly retreated to new markets, allow-
broke with industry practice and targeted its 1x ing it to regain its financial footing and then use
tools only at steps that did not require cutting- its resources to innovate in a more promising
edge performance. That entailed developing area: laser-spike-annealing equipment, which is
technologies and processes that allowed chip used in semiconductor manufacturing but does
makers to mix and match Ultratech’s tools with not compete with lithography. The company pi-
those of competitors and persuading customers oneered this technology and established itself as
to alter their purchasing habits. These steps re- the market leader.
quired Ultratech to orchestrate substantial orga- One can’t help wondering if other compa-
nizational changes, including in development, nies that foundered when their mainstay mar-
sales, and marketing. kets were challenged by a new technology
In addition to retrenching, Ultratech might have fared better if they, too, had proac-
searched for relocation opportunities outside tively retreated to defensible niches. For exam-
its traditional market. It identified applica- ple, Kodak might be healthier today had it re-
tions that valued high-resolution printing but acted to the rise of digital photography by
did not require 5x resolutions. One was the focusing on niche markets such as disposable
manufacture of thin-film heads for disk drives. cameras and allocating resources to more-
With drive performance improving at an ex- defensible niches such as medical imaging. In-
tremely high rate, the resolution requirements stead, it fought a losing battle to extend the life
in head production were constantly increasing. of its mass-market chemical-photography busi-
ness with its APS initiative. Similarly, AOL
could have responded to the rise of the World
Wide Web by retreating from its mass-market
Relocation: Finding strategy and offering its “walled garden” to
niches that valued exclusivity.
New Markets
Use these six questions to guide your efforts
Organizing Bold Retreats
Making a transition from an old technology to
to move an old technology to a new market.
a new one is, of course, extremely difficult. A
1. If we gave away the old technology for lack of technical competence; radically differ-
free, who would want it? Who could use it? ent production, sales, and support require-
2. Why aren’t those who might want the old ments; and culture clashes between the advo-
technology using it now? cates of the new and the defenders of the old
3. What are these potential customers using are only a few of many obstacles to expect.
instead? How much are they paying? What may be less obvious is the significant
organizational change that retrenching or re-
4. What adjustments would we need to
locating an old technology requires. Product-
make in order to sell at this price?
development, manufacturing, marketing, and
5. How much more value would this new sales priorities must all be refocused on creat-
set of customers derive if they used our ing the most value for the new target markets.
technology instead of the current And because retreat entails much more subtle
alternative? organizational adjustments than making the
6. Compared with our other choices, how leap to a new technology involves, leaders may
attractive is the relocation option? have to play a hands-on role in managing day-

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Bold Retreat

to-day activities. Here are some guidelines for share resources and capabilities is easier said
leading such a transition. than done, especially when teams find them-
Revamp your organization’s focus, cost selves competing for customers. By being ex-
structure, and talent base. Retreats often re- tremely explicit about ground rules such as
quire painful resizing to align the organiza- which market segments the old technology
tion’s footprint and cost structure with those will not compete for, management can reduce
that can be supported in the niche. The R&D internal conflicts and optimize the perfor-
function, for example, must shift its focus from mance of both teams.
exploring its industry’s technology frontier to Remember the competition. It’s highly likely
refining the existing technology in order to ad- that a smaller target market will be able to
dress the needs of different sets of users, which support only a smaller number of rivals. Pre-
often include a new price-performance bal- empting competitors by moving early into a
ance. Similarly, the sales and marketing func- niche may be crucial.
tions must adjust to support a different market Don’t underestimate the challenges of sell-
position with a different client base. This may ing a retreat strategy. Militaries have long re-
require substantial changes in personnel. In- garded retreat as a legitimate—and responsi-
deed, the stars who excelled at finding ways to ble—strategic option. Not so in business. Most
extend the old technology’s performance in executives rise to the top of their organiza-
the mainstream market may be those least tions by promising and delivering growth, suc-
suited to finding ways to guide it away from cess, and better times. Giving up a market po-
the mainstream. sition without a big fight runs counter to the
Be prepared to deal with upheaval in your can-do attitude that we expect from business
ecosystem. The emergence of a new technol- leaders. Although it’s easy to get your organi-
Managers of old- ogy inevitably causes members of the old tech- zation, including your board of directors, to
nology’s ecosystem—suppliers, complemen- understand why a retreat is necessary after the
technology firms tors, distributors, and even capital providers— business has suffered deep losses, it is much
to reassess their roles and relationships (see harder to successfully argue for retreat before
who try to delay the “Match Your Innovation Strategy to Your In- the battle has begun. Do not allow accusations
inevitable often waste novation Ecosystem,” HBR April 2006). Some of timidity to overwhelm the logic of realistic
may decide to abandon their support of the foresight.
resources and damage old technology in order to concentrate re-
their companies. sources on supporting the new one. Even A bold technology retreat is not always a via-
those that can’t make the transition to the new ble option, let alone an optimal one, when a
technology may decide that the opportunities new technology emerges. However, it’s an op-
offered by the repositioned old technology are tion that must be considered during a strategic
inadequate and choose to exit the business. review. Retreating to an existing niche or relo-
The result: a critical hole in the ecosystem cating to a new market may allow a firm to
that’s hard to fill. For example, manufacturers continue to prosper on a more modest scale.
of high-end audio equipment have struggled These positions can serve as a safe haven for
to find sources of vacuum tubes. If critical recouping strength and then attacking new
partners abandon the old technology, your growth opportunities.
firm may have to perform that role itself. In all cases, however, retreats have to be
Appreciate the risks of embracing a mixed bold. They must be pursued before the tech-
(old + new) strategy. Deciding whether to em- nology fight is lost and the firm’s resources are
brace an emerging new technology or reposi- drained—and before the advancing new tech-
tion the old one is not necessarily an either-or nology has taken hold and created a crisis for
decision. Indeed, at first glance, there are ad- your business. Retreats carried out proactively
vantages to attempting both: potential syner- can avert catastrophic defeats.
gies and spillovers, shared learning, maxi-
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