Successful organizations internalize their criteria until they cannot read market change.

Evidence

Intel’s introduction of the Celeron processor in 1998 to counter AMD at the low end of the PC market segment testified to the company’s continued capacity to make quick adjustments that reinforced its competitive strategy. The need for a crash effort to introduce the Celeron processor, however, suggests that Intel, while innovating at a high rate, had begun to produce innovations – for instance, microprocessors based on design-to-performance rather than design-to-cost – that were less in tune with evolving environmental demands (Sorenson and Stuart, 2000). Intel seemed to have difficulties recognizing that the importance of the external selection environment relative to the internal selection environment was increasing toward the end of Grove’s tenure as CEO (Sorenson, 2000). Intel’s difficulties in this respect seem consistent with the observation that in successful organizations there will be a natural tendency for internal selective-retentive processes to dominate external ones (Miller, 1999, p. 94). Co-evolutionary lock-in may thus be a potentially interesting extension and further elucidation of structural inertia (Hannan and Freeman, 1984). — Georg Schreyögg and Jörg Sydow, The Hidden Dynamics of Path Dependence, 1132

Categorization

• XREF: Extends the earlier chapters’ ecology/selection-and-inertia arguments into the firm’s interior — external selection displaced by internal selection.
• SEED: Angle: ‘The Celeron Problem’ — why winning companies keep innovating in the wrong direction, high innovation rate masking misalignment with customer demand.
• SHARE: Niche hook for anyone steeped in organizational ecology or Hannan & Freeman structural inertia.