Wharton professors Sarah Kaplan and Rebecca Henderson recently published a paper in Organizational Science about big company inertia when dealing with new industries and changing times. If you are a managerial econ geek you’ll enjoy the full PDF of the paper, or you can check out the summary in Knowledge@Wharton.
One example of the inability to change was Kodak’s entry into the digital photography business. Chemical processing was a lucrative business and making the company a lot of money. The company staffed its new digital imaging division with employees more familiar with this world of chemical processing than image sensors and processing. The cognitive and collective frames present in the management of the chemical business persisted, and the company struggled to compete in the digital market with management practices and incentive systems tied to an old business.
Yes, the article makes me think of Microsoft and its Windows Live initiative. Hopefully Microsoft management reads papers like these and learns from the past and mistakes of others.