From Typewriters to Supercomputers

How Dominant Designs Shape Industries

The emergence of a dominant design is a pivotal moment in the evolution of an industry, marking a shift from experimentation to standardization and reshaping the competitive landscape. This is the central thesis of James M. Utterback and Fernando F. Suárez’s comprehensive analysis of technological innovation👉 Practical application of new ideas to create value. and industry dynamics across eight major product categories spanning over a century.

The authors define a dominant design as “a specific path along an industry’s design hierarchy, which establishes dominance among competing design paths.” It represents a synthesis of individual innovations into a new standard that satisfies the requirements of many users, even if it’s not the most extreme in technical performance. The appearance of a dominant design drastically reduces the number of performance requirements by making many features implicit, allowing firms to focus on process innovation and economies of scale.

Through detailed case studies of typewriters, automobiles, televisions, transistors, integrated circuits, calculators, disc drives, and supercomputers, Utterback and Suárez identify a consistent pattern:

• An industry begins with a period of experimentation, with many firms entering and offering diverse product variants. In the early stages of an industry, numerous firms enter the market with a wide variety of product designs and features. This period is characterized by high levels of product innovation as companies experiment to find the best solutions. The diversity of offerings allows the market to test different approaches and determine which features are most valued by customers.

• A dominant design emerges, often synthesizing features from earlier products and influenced by factors like collateral assets, regulation, and user feedback. Eventually, a dominant design emerges that combines the most successful elements from earlier product variants. This design is shaped not only by technological factors, but also by market forces, regulatory requirements, and customer preferences. The dominant design often represents a compromise that satisfies the needs of many users, even if it’s not the most extreme in technical performance.

• The number of firms in the industry peaks around the time the dominant design appears. As the dominant design emerges, the number of firms in the industry typically reaches its highest point. This peak in firm participation coincides with the crystallization of the dominant design. The convergence on a standard design attracts many firms hoping to capitalize on the newly defined market opportunity.

• A shakeout follows, with many firms exiting as competition👉 Rivalry between entities striving for a shared goal or limited resource. shifts to process innovation and scale economies. After the dominant design is established, a shakeout period begins where many firms exit the industry. Competition shifts from product innovation to process innovation and achieving economies of scale. Firms that cannot adapt to the new competitive landscape or lack the resources to compete effectively are forced out of the market.

• The industry eventually stabilizes with a few large firms dominating the market. Following the shakeout, the industry reaches a period of stability characterized by a small number of large firms. These surviving companies typically have standardized products and relatively stable market shares. The focus in this mature stage is often on incremental improvements and efficiency gains rather than radical innovation👉 Groundbreaking change creating new markets or transforming industries..

This pattern is clearly illustrated in cases like the typewriter industry. The 1906 Underwood Model 5, which incorporated visible typing, tabulation, and other key features, marked the emergence of the dominant design. The number of firms peaked around this time and then declined sharply as the industry consolidated.

The authors argue that entering an industry before the dominant design emerges is generally the most viable strategy for firms, especially in the United States. Early, innovative entrants often become industry leaders, while firms entering after the dominant design face high barriers to entry. However, they note that Japanese firms have successfully entered some industries post-dominant design by focusing on production capabilities and process innovation.

Several factors beyond pure technological superiority influence the emergence of a dominant design:

• Collateral assets: Existing resources and capabilities that complement the new technology. Collateral assets can provide firms with a competitive advantage when adopting new technologies by leveraging existing capabilities and resources. These assets may include complementary products, distribution networks, or specialized knowledge that enhance the value and implementation of the new technology.

• Industry regulation and government intervention: Can enforce standards or influence adoption. Government regulations and interventions can significantly impact the adoption of new technologies by setting standards, providing incentives, or creating barriers to entry. These policies can shape the competitive landscape and influence which technologies become dominant in an industry.

• Strategic manoeuvring: Firms’ competitive actions and alliances. Strategic manoeuvring involves firms taking deliberate actions to gain competitive advantages, such as forming alliances, acquiring complementary technologies, or repositioning themselves in the market. These strategic moves can help firms secure a stronger position in adopting and benefiting from new technologies.

• Network externalities: When the value of a product increases with more users. Network externalities occur when the value of a product or technology increases as more users adopt it, creating a self-reinforcing cycle of growth. This phenomenon can lead to the rapid adoption of certain technologies and the emergence of dominant designs in industries with strong network effects.

• User-producer relationships: Close interaction with customers to understand needs and preferences. Strong user-producer relationships enable firms to gain valuable insights into customer needs and preferences, informing the development and refinement of new technologies. These close interactions can lead to more successful technology adoption by ensuring that innovations align with market demands and user expectations.

The paper also highlights important differences between assembled and non-assembled products. The dominant design concept applies more clearly to assembled products like automobiles, while non-assembled products like chemicals may coalesce around “enabling processes” instead.

Utterback and Suárez’s analysis raises several intriguing questions for further research:

• How do dominant designs emerge in industries with rapid technological change or multiple product generations?
• What factors determine the total number of firms that enter an industry?
• How do patterns differ between hardware-focused and software-dependent industries?
• Can the breakdown of a dominant design without significant technological change lead to renewed competitive turbulence?

The authors suggest that future research should focus on developing multivariate models that incorporate market factors, collateral assets, regulation, and network effects to predict firm survival and success, with dominant designs as one factor among many.

They also propose viewing dominant designs through the lens of information economies. As manufacturing becomes more flexible, the determination of dominant designs may increasingly shift from producers to users. This perspective could offer new insights into how standards emerge and evolve in the age of mass customization and rapid technological change.

The comparison between U.S. and Japanese industry evolution patterns is particularly fascinating. While U.S. industries typically see a wave of entrepreneurial entrants before the dominant design, followed by consolidation, Japanese industries often show steady growth in the number of firms, with large conglomerates entering post-dominant design. However, the authors note that in more recent industries like electronic calculators and disc drives, Japanese patterns are beginning to resemble U.S. ones, with earlier entry and more pronounced shakeouts.

This comprehensive analysis offers valuable insights for both managers and policymakers. For firms, it underscores the importance of timing market entry relative to the emergence of dominant designs and aligning strategies with the current state of technological evolution in an industry. It also highlights the need for flexibility and the ability to shift focus from product to process innovation as industries mature.

For policymakers, the research illuminates how industry structures evolve and the factors that influence innovation and competition at different stages. This understanding can inform decisions about regulation, standards-setting, and policies to promote innovation and economic growth.

As technology continues to advance at an ever-increasing pace, understanding the dynamics of dominant designs and industry evolution becomes even more critical. Utterback and Suárez’s work provides a solid foundation for future research in this vital area, offering both a historical perspective and a framework for analysing emerging industries and technologies.

The Emergence of Dominant Designs in Artificial Intelligence: