Steve Blank’s Lesson About Disrtuption
What 4,000 Companies Taught Us About Disruption (And Why It Matters for AI Today)
"How did you go bankrupt? Two ways. Gradually, then suddenly." – Ernest Hemingway’s poignant observation perfectly encapsulates the fate of entire industries when faced with a disruptive force.
At the dawn of the 20th century, the United States boasted more than 4,000 carriage and wagon manufacturers. These companies were the very backbone of mobility, employing tens of thousands and supporting a vast ecosystem of blacksmiths, wheelwrights, and stable owners.
Yet, within just two decades, nearly all were gone. Only one company out of those 4,000 successfully pivoted to automobiles.
This powerful historical narrative holds uncannily familiar lessons for modern companies grappling with disruptive technologies, particularly the emergence of Artificial Intelligence (AI).
When the first automobiles — steam, electric, and then gasoline-powered — began appearing in the 1890s, most carriage makers largely dismissed them because cars were:
Loud and unreliable
Expensive and hard to repair
Starved for fuel in a world without gas stations
Unsuitable for the dirt roads of rural America
Considered toys for "nerds and the rich".
These early autos were inferior on most key dimensions that mattered to customers of the time. This scenario perfectly illustrates Clayton Christensen’s “Innovator’s Dilemma,” where disruptive innovation begins with seemingly inferior products that incumbents simply do not take seriously.
For approximately 15 years (1890s-1905), carriage makers saw no immediate threat. Their dismissiveness was rooted not just in product flaws, but also in their identity and hubris; they saw themselves as craftsmen of elegant, horse-drawn vehicles, considering cars a "heresy". This period was their "denial and drift" phase of disruption.
However, the technological S-curve bent sharply. By the 1910s, cars were clearly better, and by the 1920s, the carriage was obsolete. The Ford Model T, introduced in 1908, served as the tipping point, making automobiles affordable, durable, and easily repairable through assembly line mass production.
This was akin to the "arrival of Google, the iPhone, or ChatGPT: a phase shift". The old ecosystem collapsed as cities even began banning horses due to waste, disease, and congestion.
Why Most Failed: The Obstacles to Embracing Change
The tragedy of the carriage era wasn't just that companies failed to pivot, but that they had both time and customers, and still missed it. Why did 3,999 companies succumb to disruption? The sources highlight several critical internal and external obstacles:
Technological discontinuity: Carriages were primarily made of wood, leather, and iron; cars demanded expertise in steel, engines, and complex electrical systems. The existing skills simply didn’t transfer easily.
Capital requirements: Retooling factories for automobile production required huge, prohibitive investments that most small and midsize carriage firms lacked or couldn’t raise in time.
Business model: Carriage makers operated on a low-volume, high-margin business model. The automobile industry, especially with Ford’s Model T, quickly shifted to a high-volume, low-margin at scale that was fundamentally different.
Cultural identity: Carriage builders identified as artisans, not engineers or industrialists. Cars were seen as "noisy, dirty machines—beneath them". This deeply ingrained cultural identity prevented them from redefining their core business as "mobility".
Managers vs. visionary founders: A critical factor was the leadership structure. In the few companies that survived, it was the founders, not hired CEOs, who drove the transition. Many carriage company presidents were tied to short-term sales and increasing revenue, structurally disincentivized to act on future threats that seemed distant. Their focus on quarterly earnings rather than long-term reinvention mirrored modern challenges.
Underestimating the Adoption Curve: Despite early cars being "bad," technological S-curves bend quickly. Companies failed to recognize how rapidly automobiles would improve and become clearly superior.
The Few Who Succeeded: From Horses to Horsepower
While the majority failed, a select few either transitioned or capitalized on the new era:
Studebaker: Founded in 1852, Studebaker started by building wagons and became the largest wagon manufacturer globally by the late 19th century. Unlike its peers, Studebaker made strategic early bets on the future. They began producing electric vehicles in 1902, then entered the gasoline car business in 1904. Studebaker understood two crucial things: the future wouldn’t be horse-drawn, and their core capability was "mobility," not just carriages. They made the difficult, painful shift, retooling factories and retraining their workforce, becoming a full-fledged car company by the 1910s. Studebaker survived until 1966.
Fisher Body: Founded in 1908 by brothers who had worked in a carriage firm, Fisher Body didn't make entire cars but specialized in producing closed steel car bodies. This was a major improvement over open carriages and wood frames. Their innovation and success led to General Motors acquiring a controlling stake, and later, the entire company.
Durant-Dort Carriage Company (William C. Durant): While Durant-Dort itself didn't make cars, its co-founder, William C. (Billy) Durant, used his carriage fortune to invest in the burgeoning auto industry. He founded Buick in 1904 and, in 1908, established General Motors, rapidly acquiring numerous car and parts companies to create the first auto conglomerate. Though his financial strategies were often audacious, his vision profoundly reshaped American manufacturing.
Lessons for Today: Are You Building a Studebaker?
The parallels between the carriage industry’s collapse and the challenges facing today's companies, particularly with the rise of AI, are stark. Just as carriage companies had time and customers but still missed it, many modern CEOs and boards are "structurally disincentivized to act" on future threats. Compensation tied to quarterly earnings, and boards packed with risk-averse fiduciaries often reward share buybacks over "AI moonshots".
The real problem isn't an inability to see the future; it's the inability or disincentive to act on it. Disruption doesn’t wait for board approval.
As a leader today, you are facing a choice. Are you redefining your company's core capability to embrace the future, like Studebaker, or are you risking becoming one of the 3,999 who vanished, slowly then suddenly?
Read the full article from Steve Blank’s blog.
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