TECHNOLOGICAL CHANGE AND ORGANIZATIONAL INERTIA IN THE COMPUTER INDUSTRY

An organization’s ‘Achilles heel’ can often be found in the routines and processes which were
the basis of past success.

In a fast-moving, technologically complex and innovative industry dominated by small firms with
well-developed communication and technology transfer, one firm’s inability to keep pace with
innovations in manufacturing processes forced it out of business.

Kasper Instruments (KI) produced photolithographic alignment equipment, used to manufacture

semi-conductor devices. Their manufacture required the transfer of small, intricate patterns on to
the surface of a wafer of semi-conductor material such as silicon. This transfer process, called
lithography, required only certain areas of the wafer to be exposed to light, with masks used to
provide the appropriate shield.

Contact aligners were the first form of mask to be used commercially and, as the name suggest,
these may contact with the wafers. KI’s position as industry leader was because of its expertise in
the contact alignment technique. However, as technology became more advanced, proximity masks
were able to be used which did not come into contact with the wafer, so the risk of damage was
reduced. Technology within the industry continued to develop incrementally until a quite different
process of electron beam alignment was developed in which a focused beam wrote directly on to the
wafer. Yet the industry leader was unable to make their technological transition; in the switch from
contact to proximity aligners. KI lost its position of industry leader to Canon and was ultimately
forced to leave the industry.

The technological change needed for KI to keep pace with Canon and introduce the more efficient
proximity alignment technique was, in technological terms, relatively minor; and the top team at KI
were keenly aware of the need to change. However, they seemed unable to rise to Canon’s
challenge, refusing to accept the obsolescence of their own expert knowledge in the contact
technique. Whilst KI continually held on to the past, trying to modify its own production technique
to include some elements of Canon’s innovative procedures, with no success, its market share
slipped away. When the engineers at KI were given a Canon proximity aligner to take apart with a
view to producing their own model, they dismissed it as a mere copy of their own (very different)
contact.

What seemed to be a small incremental development in technology required KI to totally rethink the
way it did business, from its production processes to its sales and marketing strategies. In its failure
to translate its technological understanding of the need for change by changing the routinized
processes existing in the organization, it was not alone. Throughout the history of technological
change within this industry, each innovation has been a harbinger of doom for the market leader.

(Prepared by Phyl Johnson, Graduate Business School, University of Strathclyde)

1. Which processes of strategic management might have helped to avoid KI’s problems?
2. Would these processes be suited to organizations facing less innovatory or changing
environments?