An interesting observation in a piece in the New York Times about Hollywood’s Summer of Flops (Lone Ranger, etc.) that states the obvious but is worth keeping in mind during this era of severe “digital disruption:”
“The instinct to retrench and overemphasize strategies that have worked in the past is a common problem in companies as they get bigger and have more to lose, particularly as technologies change. Polaroid and BlackBerry doubled down on their time-tested formulas despite market changes, suggesting that this behavior can undermine even the most successful companies. “The more successful and larger they become, the more antibodies they develop to doing anything new,” said Alan MacCormack, a Harvard Business School professor. “
“Because persuading an industry’s largest companies to experiment is challenging, smaller and more entrepreneurial companies are usually tasked with figuring out the next-generation business model.”
The biggest impediment to innovation is an installed base (to paraphrase Mitch Kapor), and management strategy consultants have made bank for decades advising the CEOs of the biggest companies on how to make the transition from an ailing cash cow to a refreshed, innovative stance that will drive growth and defend against upstart startups without the baggage of the old cow. The problem is, other than Apple’s resurrection by the Second Coming of Jobs, and the Gerstner rebuilding of IBM from big iron to big services …. what old brands have managed to deliver a second act?
The obvious solution for a lumbering dinosaur sitting on a big mound of money is to buy the next-generation start-ups and develop a sort of internal VC radar to identify the hot upstarts out on the edges of the industry and simply buy their IP and talent. The internal skunkworks model of delivering breakthrough innovation (innovation in my book is invention made commercial) may have worked at Lockheed and a few other rare cases, but these are dire times for big players, most of whom are watching formerly dominant players in mobile — Nokia and Blackberry — blow marketshare dominance down to the point of single digit irrelevance in a matter of two or three years.
It’s silly to try to oversimplify the reasons for big organization sclerosis, but in my experience it has more to do with organizational design, governance, quarter-to-quarter focus on earnings, and the self-preservation instincts of incumbent senior leadership. In other words, it’s not about ideas or magic insights, it’s about behavior and bureaucracy and the terror of possibly failing.