We have seen many giant companies faded away in the market.
Kodak, Nokia, Blackberry. It is interesting that those companies who created
the market or at first were so big in the market couldn’t survive at last. Why
is that?
Maxwell in his blog asked, “Why big companies can’t innovate?”
I see this question as an answer to my question. The failure to innovate in big
companies may be one of the reasons that these companies went away. However, it
is unfair to say that big companies can’t innovate. But it is a common phenomenon
that it is much harder for big companies to deliver and deal with high quality
innovation, not mention disruptive innovation. Maxwell stated reasons that
cause this phenomenon.
Big companies which have a mature business model and company
structures put “profit” as the joint basis of innovation with “solving problems”.
This adds distractions to innovation and makes this kind of innovation less influential
to the market. Operational efficiency is one way to achieve higher profit. Like
the blog says, big companies tend to set taking advantage of existing resources
as the premise of innovation. Under this premise, big companies have higher possibility
in delaying adopting newer technologies and disruptive innovations. Nokia and
Blackberry are laggards in entering smart phone market and touch-screen devices
market. The same thing happened to Kodak. Kodak invented digital camera, but
refused to go after this direction since the new direction will cause great
waste of its existing resource.
I never doubt about big companies’ ability in innovating. A big
company has better access to resources such as intelligence resource. Smart people
go to big companies for better compensations and future. Also, big companies
usually have great and right vision of their future and direction. The ideas
they build have great quality. However, once the motivation of innovation is
not pure anymore, big companies will have limitations in delivering or commercializing
an idea, just like what happened to Gerber Singles.
Besides the topic, I found the Gerber Singles a very good example
of company going after customer segment first instead of value proposition and
key activities as we talked about in the business model canvas discussion. In the
case, Gerber found the customer segment, the busy working Americans, very
attractive and the needs of this customer group haven’t been fulfilled yet. With
the target customers, Gerber started thinking what they could do to win the
market.
Reference
Maxwell Wessel, “Why Big Companies Can’t Innovate?” http://blogs.hbr.org/cs/2012/09/why_big_companies_cant_innovate.html
The article Maxwell posted does do a good job at identifying some of the reasons why big companies struggle with the idea of innovation. One thing that I found interesting in some of my research on this topic was that some companies - mostly big or mature - are claiming that they "innovate" just to keep up with the start-ups arriving in the market.
ReplyDeleteThe number of start-ups is staggering. That's not to say that they all have great ideas or that they will all be successful. In fact, many of them will fail. What seems to be happening though is that there is a new era, as Scott Anthony describes in the Harvard Business Review and highlighted here in a Wall Street Journal article as well: http://blogs.wsj.com/atwork/2012/08/17/can-big-companies-be-truly-innovative/
That new era he describes is one where larger companies are feeling the pressure to be innovative. My follow-up question to all of this would be how we actually define this. In Maxwell's article he talked about what VCs are looking for in start-ups - that creative approach to customer's problems. What happens when a company is not relying on VCs and they have the means to move on their own. Are we seeing the same result as we would with a start-up?
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ReplyDeleteMenting I agree that Gerber definitely found a customer segment with a great potential need that could be met, but they limited themselves in how to provide a product by staying cautious and not taking any major risks when developing their product, which proved to be unsuccessful. To be more successful, a company may consider setting aside "risk" money for this exact type of scenario, for R&D as well as processs develoment if innovation is an important part of their overall company goals.
ReplyDeleteTo Tanya's point about seeing the same result with VC's and start-up's versus innovating within a large company one thought comes to mind. I think what comes into play is that a start-up group has the pressure of being successful because they are risking other people's money who have consciously contributing to their specific idea/plan, knowing the risks. The failure of the start-up is the end of someone's livelihood and loss of personal contributions. Within a large company, the money is already there, there may not be as strong of a personal accountability on either end, the type of pressure felt may not be as severe as that between a VC and start-up, and therefore the efforts put forth may not be as extreme within a large company.
Mengting, I believe you're right that there is no "doubt about big companies’ ability in innovating". After all, they have the resources, including financial and human resources, to take up the innovation challenges. However, it is the culture and structure of large companies that prevent them from successfully releasing innovative products. I have my own reservation about your following comment. "Smart people go to big companies for better compensations and future." Well, many smart people are attracted to small startups from large companies because of better future and potentially large payout if the startups succeed. In fact, people in startup companies are motivated to work hard partly because of their vested interests in the companies.
ReplyDeleteAs to Tanya's question about seeing the same result (from companies having the means to move on its own) as we would with a start-up, I believe so. If the company has the capacity to tolerate startup culture, they should be able to do what start-up can accomplish. Apple, for example, is able to deliver again and again on innovative products even as the company becomes the world most valuable company (market capitalization).