Comments on: Counterparties: Why big companies are bad at innovating http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traduceri daneza romana http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-53741 Mon, 29 Sep 2014 14:05:32 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-53741 Merely, amazing what we do the following. It truly is desirable to check you communicate from the cardiovascular as well as your clarity for this substantial articles is usually very easily looked. Amazing publish and will count on your own future revise.

]]>
By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41945 Fri, 20 Jul 2012 22:13:11 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41945 Angry, the iphone was a success before they started the app store, that just made them more entrenched (and the app store itself was innovative). Apple’s biggest luck is the incompetence of their competitors.

btw, what are you angry about?

]]>
By: AngryInCali http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41944 Fri, 20 Jul 2012 22:04:35 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41944 What’s the chance Apple was simply lucky in basing the mobile experience on an app ecosystem at the right time in the development of the technology? Luck never seems to be the favored explanation of pundits…

And anyone who thinks the hardest part about search is building the engine is more than welcome to build one and see how it does! Thiel certainly has the money. Hint: like elevators, it’s the maintenance that generates the money.

]]>
By: Curmudgeon http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41936 Fri, 20 Jul 2012 20:29:28 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41936 Three reasons. First, established tech companies are loathe to introduce internal competition to their cash cow. That is the one place where I give Apple all the credit in the world.

Second, most big ideas start out quite small. But large companies can’t justify investement in small things, because they won’t budge growth. So they take a pass on many things that might grow the company significantly, because they are too small to bother with.

Third, large companies forget who the customer is. I consulted for Digital in the early 1990s, and internally they were too busy trying to sell ideas to each other to worry about their paying customers. I sat in hours-long meetings where the only consideration was how other parts of the company might accept their product ideas.

]]>
By: MrRFox http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41933 Fri, 20 Jul 2012 15:06:25 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41933 The Fairchild Semi experience explains it IMO. They had a lock on all the production and all the ideas and all the people at the outset of the Valley as we know it. But management in NYC want to operate as a cash cow, avoid risk and investment – play fat, lazy and safe. The engineers in CA rebelled, fled and Fairchild effectively disappeared. From its human fragments arose Intel and other big names.

Xerox invented the mouse and the window-style format in use today. Management killed it, to the dismay of the Xe-techies, and to the delight of Steve Jobs, who took it over. Why take chances when the status quo is so good?

Doesn’t seem like much has changed. Not sure how realistic it is to think it ever will. Or that it should.

]]>
By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41932 Fri, 20 Jul 2012 14:55:33 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41932 Large companies are bad at innovating because they don’t have to. Once they become an incumbent, they try to sell what they are already making. The don’t want to take risks on new things because they don’t like risks, and they want to milk every product for as long as they can (that’s usually because some accounting person will throw up ROI babble and say it’s not worth investing in a disruptive product).

New companies have no choice but to innovate. If they don’t have something better, they won’t sell their product.

Apple was an exception to the large company rule. They killed the ipod mini at the height of its sales, and introduced something better, the ipod touch. Then they effectively killed that with the iphone (but they still sell amazingly lots of them), and they have cannablilzed sales of laptops with the ipad. I don’t think Nokia (while we’re on the subject, I have to admit to conflating Nokia and RIM in my earlier comment, which is understandably easy to do, as they both screwed up big time) falls into the category of a big company refusing to innovate to avoid risk or because they wanted to milk their current products, they just were incapable of reading the tea leaves. They thought because they were still selling lots of their outdated phones that that is what people wanted to buy.

Another reason why big companies are bad at innovating is that they are typically not run by the founders who have the vision for what products to sell. Instead, “investors” demand “professional” managers, who focus on formulas for success and not customer satisfaction. Instead of innovation, they rely on their sales channel, their brand name, marketing, and controlling costs. The last one is like eating sugar for energy, as it causes bad long term damage. Focusing on reducing costs puts employee income on a race to the bottom, which ends at the bottom. When leading companies pay as little as possible to cut costs, their competition does the same, and the result is that overall workers have less money to spend (that money instead gets shifted into cash hoards that accomplish nothing). As workers of even successful companies earn less, they spend less. Companies respond to declines in sales in their home markets by shifting their focus to new markets. Selling the same stale products, until some new company comes along and innovates, and takes away their business. The management is replaced, or the company is acquired, or it acquires the new company that takes their business away.

All because you put bean counters in charge of deciding what products to make.

]]>
By: wmaustin5 http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41931 Fri, 20 Jul 2012 14:01:48 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41931 As has been said above the article never actually addresses “why” large companies are bad at innovating. Tons of interesting points in both this and the linked articles but come on.

]]>
By: Sechel http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41925 Fri, 20 Jul 2012 09:22:35 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41925 As companies grow functions split up, departments specialize managers form alliances and the process becomes both political and bureaucratic. When companies get truly big there is also the tendency for owners to treat employees more as a cost than as a source of profit and employees become more removed from owners and begin to view owner motives suspiciously as well. For this and other reasons you see the small companies innovate, the successful ones grow become big and as they mature lose the entrepreneurial spirit plateau and or slowly die.

]]>
By: MrRFox http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41924 Fri, 20 Jul 2012 06:29:34 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41924 A bit of historical perspective, perhaps –

The conflict between the Valley’s creative innovators and the corporate suits in NYC, and in the local suites, dates from the 50’s, and William Shockley’s original founding of Silicon Valley. An unbroken sequence of rebellions against corporate stifling of innovation gave rise to many of the great tech companies, starting with those household names founded by ‘The Traitorous Eight’.

Can get started reading about it here –

http://en.wikipedia.org/wiki/Traitorous_ eight

]]>
By: Wade_Kelman http://blogs.reuters.com/felix-salmon/2012/07/19/counterparties-why-big-companies-are-bad-at-innovating/comment-page-1/#comment-41921 Fri, 20 Jul 2012 03:10:43 +0000 http://blogs.reuters.com/felix-salmon/?p=16286#comment-41921 You didn’t actually explain why big companies are bad at innovating. First, you said “Nokia does not suffer from a dearth of ideas”, then you quoted Thiel, who said Google is “out of ideas”. So, you’ve only established that companies which can’t innovate can have either too many or too few new ideas. The same applies to doorknobs, too.
I’ve consulted for 25 years to companies large and small, and I’ve found that large companies generally don’t innovate as much as small companies because the project managers have more to lose in established companies.
In a small company, if you don’t innovate, you won’t make sales next month or payroll the month after that. You innovate or you die. A lot of times, you die anyway.
In a large company, the established product lines keep money rolling in. There is often so much generated cash that it can be spent on R&D projects and not be missed. However, when it comes time for a manager to approve the budget that converts an R&D project into a new product, the stakes rise considerably. If the manager sticks his neck out and approves the project and it succeeds, he gets a small bonus. If it fails spectacularly, he gets fired. If he cancels the project before any significant money is spent on it, he still gets a paycheck, and there are plenty of other R&D projects in the works that might pay off instead.
When you do find a big company that innovates, you will also find that the guy in charge of the project is running scared and is willing to bet the farm.
This is not rocket science. This is simply incentives.

]]>