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84 THE PRACTICE OF INNOVATION

And the case of the book chains reported earlier (in Chapter 3) is
also a story of structural change because of rapid growth. What nei-
ther the publishers nor the traditional American bookstores realized
was that new customers, the “shoppers,” were emerging side by side
with the old customers, the traditional readers. The traditional book-
store simply did not perceive these new customers and never attempt-
ed to serve them.
But there is also the tendency if an industry grows very fast to
become complacent and, above all, to try to “skim the cream.” This is
what the Bell System did with respect to long-distance calls. The sole
result is to invite competition (on this see also Chapter 17).
Yet another example is to be found in the American art field.
Before World War II, museums were considered “upper-class.” After
World War II, going to museums became a middle-class habit; in city
after city new museums were founded. Before World War II, collect-
ing art was something a few very rich people did. After World War II,
collecting all kinds of art became increasingly popular, with thou-
sands of people getting into the act, some of them people of fairly
limited means.
One young man working in a museum saw this as an opportunity
for innovation. He found it in the most unexpected place—in fact, in
a place he had never heard of before, insurance. He established him-
self as an insurance broker specializing in art and insuring both muse-
ums and collectors. Because of his art expertise, the underwriters in
the major insurance companies, who had been reluctant to insure art
collections, became willing to take the risk, and at premiums up to 70
percent below those charged before. This young man now has a large
insurance brokerage firm.
3. Another development that will predictably lead to sudden
changes in industry structure is the convergence of technologies that
hitherto were seen as distinctly separate.
One example is that of the private branch exchange (PBX), that is,
the switchboard for offices and other large telephone users. Basically, all
the scientific and technical work on this in the United States has been
done by Bell Labs, the research arm of the Bell System. But the main
beneficiaries have been a few newcomers such as ROLM Corporation.
In the new PBX, two different technologies converge: telephone tech-
nology and computer technology. The PBX can be seen as a telecom-
munications instrument that uses a computer, or as a computer that is
being used in telecommunications. Technically, the Bell System would