Competence Destruction Theory of Entrepreneurship
Competence Destroying Innovation: The Entrant's Advantage Why do industry giants often crumble when faced with new technology? According to the seminal work of Tushman & Anderson (1986) , the answer lies in whether an innovation destroys or enhances the firm's existing strengths. The theory posits a simple rule: Competence-destroying innovations are brought to market more successfully by new entrants (startups), while competence-enhancing innovations are dominated by incumbents. Defining Competence To understand the theory, we must first define what makes a firm "competent." Competence = Abilities + Resources An incumbent firm's competence is "destroyed" when a technological innovation renders their existing abilities or resources obsolete. A classic example is Blockbuster vs. Netflix . Blockbuster’s massive retail footprint (a resource) and logistics for managing physical stores (an ability) became liabilities when Netflix intro...