The Dynamics of Standing Still Summary

The Dynamics of Standing Still:

Firestone Tire & Rubber and the Radial Revolution by Donald N.Sull

In the late 1960s, Firestone was perhaps the best managed company in its industry. But When Michelin introduced the radial tire and shook up the U.S. market, writes HBS professor Donald Sull, Firestone’s historical success proved its own worst enemy.

 This paper of Firestone Tire& Rubber’s response to foreign competition and new technology yields intriguing insights into how industry leaders respond to changes in their competitive environment. Faced with obvious technical innovations or aggressive new entrants, incumbent leaders are often accused of inertia, and sometimes compared to the proverbial deer frozen in the headlights of and oncoming automobile. Firestone, however, clearly did not react to radials by doing nothing. While inertia is often equated with inaction, the term can also refer to the tendency of a moving object to persist in an established trajectory in the face of outside force. I define the term “active inertia” to describe and organization’s tendency to persist in the activities that contributed to its past success despite even the most dramatic changes in its competitive environment. Faced with new technology and aggressive foreign competition, Firestone responded with active inertia rather than inaction.

 Firestone’s active inertia raises the questions of what forces lock established competitors into historical responses. This paper identifies established strategic frames, process, relationship and values as the key structural elements that channeled Firestone’s response to radial tires into well-worn grooves.

 The active inertia framework builds on an influential stream of research analyzing how firms’ investment processes influence their response to technological changes.

 The Firestone history reaffirms the central role that companies’ investment processes play in channeling their response to new technologies. This paper contributes two insights to previous research on the investment process. First, the Firestone history highlights the importance of the capital budgeting process not only in shaping investments in new technology, but also in influencing the timing of exit from old technology. Second, the Firestone history also demonstrates that a bottom-up investment process well suited to investments for traditional customers can stall in reverse and fail to promote necessary disinvestment from old technologies.

 Firestone’s story is deeply intertwined with the history of Akron, and can therefore contribute to the current discussion on industrial clusters. Michael Porter defines industrial clusters as “critical masses-in-one place of unusual competitive success in particular fields,” and along with other economists argues that geographic co-location increases firms’ productivity and innovativeness by concentrating specialized resources in a condensed area, by facilitating knowledge transfer and heightening competition among firms within a cluster.
Akron’s tire industry was one of America’s most dynamic and technically exciting industrial clusters at the turn of the century. Once vibrant clusters centered around steel in Pittsburgh, automobiles in Detroit, minicomputers in Boston, watched in Geneva and cutlery in Sheffield, and all suffered similar fates.