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The popular theory which explains why this happens is documented as the innovator's dilemma: https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma https://en.

by gretch 7y ago

The popular theory which explains why this happens is documented as the innovator's dilemma: https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma Basically to become that successful, companies have some hit product that becomes their golden goose. All data in the world says that a dollar invested in keeping the golden goose alive and healthy is the optimal way to invest that dollar. No one in the company (not execs, or accountants, or engineers) would want to disrupt this good thing that's going on. Like, suppose that technologists/engineers make rational data-driven decision - look at this huuuge pile of data that validates the decision to continue doing the same thing over and over again. At that point the business model and original product are baked into the companies DNA, and despite new things coming along, they really can't even imagine what it's like to do anything else. The ability to reinvent is truly the secret sauce to business. Very few execs can do this for their organizations. If someone could do it reliably and predictably, they'd instantly be compensated $100M+ and dropped into any of the companies you mentioned to 'turn it around'

sumanthvepa 7y ago
This used to be true for the old line of tech companies. The new tech behemoths have learned that lesson well. Their senior management and boards are paranoid about disruption. They are extremely agile with new opportunities. See Alphabet's range of investments, ditto Amazon, Microsoft, Facebook and Apple. In many cases, the founders separate themselves from the day-to-day management and short term revenue pressures that Wall imposes. This allows them to focus on new areas of growth. The share structure, allows this to happen -- class B stock give the founders the ability to ignore short term revenue pressure to some extent. This generation of tech companies are different beasts.
- bluGill 7y ago
  Everybody thinks they are different until proven otherwise. This generation is risking that there won't be a next big thing, and so someone smaller but more focused comes from behind and slowly takes over while they are focusing too much energy on looking for a next big thing that never happens. A more focused organization would better look after the core business and not be disrupted by someone who does their core business just a little better. I can't tell you which answer is right (ask me in 30 years), but I can see possibilities.
  - sumanthvepa 7y ago
    True. I agree, and indeed hope that today's giants will be disrupted. The only thing worse than a monopoly is an eternal one. My point was more of a warning to startup founders and investors. They should not assume that Google and the others will be too slow to respond to a competitive threat that a startup poses or a big opportunity that a startup creates. They will pounce aggressively, and either acquire or kill the startup. Complacency about FAANG is very very dangerous to the health of a startup.
- simonh 7y ago
  And yet Google was completely blindsided by Facebook. Google even had social network apps, and the whole time Facebook was rising they tried to compete with it. The same goes for messaging and WhatsApp. Google had competing messaging products the whole time.
mixmastamyk 7y ago
A critcal point in that book is about profit margins. No one making 40% is interested in a new business making 20% even if it may eventually be 10x bigger. It’s seems risky until it’s too late.
- tonyedgecombe 7y ago
  Especially when that 20% might supplant the 40% business.
  - jacobush 7y ago
    Kodak knew and they tried, but they misread how fast the transition would go. They thought there would be a period for hybrid film/digital devices, for instance.
    - tonyedgecombe 7y ago
      It's hard to criticise Kodak because they really were pioneers in the early days of digital photography.
      - pedrocr 7y ago
        The Innovator's Dilemma covers that too though. It's usually the case that the incumbent does invent the disruptive technology. Actually selling it in scale ends up not happening and often the eventual winner is actually formed by old employees of the incumbent who see the opportunity and can't get the organization to move on it, so they form a new one. To me that was the most amazing part of the book, that the barrier wasn't the technology itself, it was all incentives/politics/etc that made it not work.
        dman 7y ago
        Fascinating
    - agumonkey 7y ago
agumonkey 7y ago
there's an anthropomorphic factor.. companies know there's a chance they will die, but they can't find the strength to overcome fear of switching most of the time. They'd rather milk the cow until the last drop, which is what happens.

by gretch 7y ago

sumanthvepa 7y ago

This used to be true for the old line of tech companies. The new tech behemoths have learned that lesson well. Their senior management and boards are paranoid about disruption. They are extremely agile with new opportunities. See Alphabet's range of investments, ditto Amazon, Microsoft, Facebook and Apple. In many cases, the founders separate themselves from the day-to-day management and short term revenue pressures that Wall imposes. This allows them to focus on new areas of growth. The share structure, allows this to happen -- class B stock give the founders the ability to ignore short term revenue pressure to some extent. This generation of tech companies are different beasts.

bluGill 7y ago
Everybody thinks they are different until proven otherwise. This generation is risking that there won't be a next big thing, and so someone smaller but more focused comes from behind and slowly takes over while they are focusing too much energy on looking for a next big thing that never happens. A more focused organization would better look after the core business and not be disrupted by someone who does their core business just a little better. I can't tell you which answer is right (ask me in 30 years), but I can see possibilities.
- sumanthvepa 7y ago
  True. I agree, and indeed hope that today's giants will be disrupted. The only thing worse than a monopoly is an eternal one. My point was more of a warning to startup founders and investors. They should not assume that Google and the others will be too slow to respond to a competitive threat that a startup poses or a big opportunity that a startup creates. They will pounce aggressively, and either acquire or kill the startup. Complacency about FAANG is very very dangerous to the health of a startup.
simonh 7y ago
And yet Google was completely blindsided by Facebook. Google even had social network apps, and the whole time Facebook was rising they tried to compete with it. The same goes for messaging and WhatsApp. Google had competing messaging products the whole time.

mixmastamyk 7y ago

A critcal point in that book is about profit margins. No one making 40% is interested in a new business making 20% even if it may eventually be 10x bigger. It’s seems risky until it’s too late.

tonyedgecombe 7y ago
Especially when that 20% might supplant the 40% business.
- jacobush 7y ago
  Kodak knew and they tried, but they misread how fast the transition would go. They thought there would be a period for hybrid film/digital devices, for instance.
  - tonyedgecombe 7y ago
    It's hard to criticise Kodak because they really were pioneers in the early days of digital photography.
    - pedrocr 7y ago
      The Innovator's Dilemma covers that too though. It's usually the case that the incumbent does invent the disruptive technology. Actually selling it in scale ends up not happening and often the eventual winner is actually formed by old employees of the incumbent who see the opportunity and can't get the organization to move on it, so they form a new one. To me that was the most amazing part of the book, that the barrier wasn't the technology itself, it was all incentives/politics/etc that made it not work.
      - dman 7y ago
        Fascinating
  - agumonkey 7y ago

agumonkey 7y ago

there's an anthropomorphic factor.. companies know there's a chance they will die, but they can't find the strength to overcome fear of switching most of the time. They'd rather milk the cow until the last drop, which is what happens.