When leading firms invent disruptive innovations but fail to capitalize on them: groupthink and the failures at Kodak and Xerox

Purpose Explanations for two of the most significant missteps of established firms in failing to pursue important new innovations over the past century have traditionally been chalked up to blunders in resource allocation or simply short-sighted management. This paper, however, examines the more cognitive factors associated with groupthink in top management teams. Through a comparative analysis of Eastman Kodak and Xerox, this paper aims to examine how groupthink constrained management’s capabilities to pursue two of the most important disruptive innovations in recent decades, which these firms themselves actually invented. Design/methodology/approach This study adopts a combined framework using groupthink symptoms and related behavioral processes for an in-depth comparative case study of Kodak and Xerox corporations, constructed from secondary data along with some primary data. Findings Recurrent patterns associated with three main categories of the groupthink symptoms and four subsequent behavioral processes were identified in both Kodak and Xerox based on archival evidence and select interviews. When disruptive innovations emerged in-house, they were not simply downplayed by decision-makers but were delegitimized through groupthink processes and established organizational routines. Research limitations/implications This research extends existing explanations of a major source of leading firm failures, that is, why incumbents often fail to recognize key innovations that can disrupt and undermine their market leadership. Some of the largest organizational blunders and failures in history may be explainable in part from the vantage point of groupthink within top management teams as a collective cognitive schema. Originality/value This study enriches theory and case evidence on disruptive innovation by suggesting further mechanisms by which established firms miss major disruptive innovations. Cognitive elements such as groupthink and cascade effects that occurred in the two large incumbent firms in the late 20th century, led them to overlook key, market-creating disruptive innovations.