Richard N. Foster and Sarah Kaplan

“Cultural lock-in”-the inability to change the corporate culture even in the face of clear market threats-explains why corporations find it difficult to respond to the messages of the marketplace. Cultural lock-in results from the gradual stiffening of the invisible architecture of the corporation and the ossification of its decision-making abilities, control systems, and mental models. It dampens a company’s ability to innovate or to shed operations with a less exciting future. Moreover, it signals the corporation’s inexorable decline into inferior performance. Often cultural lock-in manifests itself in three general fears-the fear of cannibalization of an important product line, the fear of channel conflict with important customers, and the fear of earnings dilution that might result from a strategic acquisition. As reasonable as all these fears seem to be to established companies, they are not fears that are felt in the market. And so the market moves where the corporation dares not.

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