Why Big Companies Fail
Being right is the enemy of staying right because it leads you to ignore the way the new world works. This is one of the reasons why companies rise and fall. Companies learned to play one game and got good at it, but the market is constantly changing to a new kind of game.
Leadership tends to see more risk in the downside of the current plan than the upside in taking on new things. They are un-incentivized to react to new products and distribution channels.
I’ve advised famous big companies where the ego of a product line boss always trumped overall long-term strategy. It was about their bonus and promotion, not the company.
Managers are paid to leverage their advantages, not destroy them; to increase margins, not obliterate them. A company doing well reduces the incentive to explorer risky ideas, especially when those ideas conflict with their proven business model. Their focus isn’t on innovation but iterating and protecting the existing golden goose.
- View a temporary trend as a competitive opportunity
- Love the new idea, not the new way of thinking
- Believe it’s easy to span across generations
- Reward the “data-driven”. Hate being wrong.
- Politics all day
- If it's a simple bolt-on to an existing tool, let's do it
- If it overlaps with the responsibilities of two VPs, hmmm...
Why Unknown Startups Win
Paths Not Yet Taken
Truly transformative products rarely fit into pre-defined boxes. The most legendary founders in history do not want their product, company or, frankly, even themselves to be compared to what came before.
To maximize the odds of creating your own category, you should totally ignore “the trend...the data”. Numbers are about the past if you want to create new things, if you thinking about the existing market size, the market you are thinking about to getting in is full of competitors. You try to win at the same game as everyone else with less resources. You chase the current winners by acting and thinking as the current winners. In the effort to look or act like someone else, to be closer to their path, you forget that outliners success lies at the end of paths not yet taken.
Instead, you need to focus on what’s the one that can’t be copied over time. To create a new category, you should simply think:
- Can I design a category that I have the chance to dominate in the long term?
- What’s the unique leverage other companies can’t/hard to clone in that category? How to create that?
- What’s the opportunity cost of building that?
- How to make that leverage compound over time?