How does innovation typically affect established businesses?

Innovation can significantly disrupt established businesses, often leading to their obsolescence. As new technologies, products, or processes are developed, they can change consumer preferences and economic dynamics. Established businesses that fail to adapt to these innovations may find their offerings becoming outdated and less competitive compared to newer entrants that embrace these changes. This phenomenon can lead to a decline in market share and profitability for firms that do not innovate.

For instance, consider how the rise of smartphones disrupted traditional camera manufacturers. Companies that were slow to adapt or integrate new technologies into their product lines faced declining sales and, in some cases, went out of business.

While innovation can sometimes enhance a business's market position by allowing it to improve products or create new ones, this is contingent on the business's ability to adapt and innovate itself. Therefore, if a business fails to engage with innovation, it risks becoming obsolete in its industry.