Before I add some commentary on big companies in general, I would like to provide a little discussion on Gerber. I do not think it is the size of Gerber that prevented it from successfully innovating. There are plenty of massive companies who are the on the forefront of innovation (see Google and Apple). I think it is more of the public perception of a company that can stifle its ability to innovate. Gerber has become a proprietary eponym for baby food (similar to Kleenex for tissue). The brand name "Gerber" is so entrenched in consumers' minds with being baby food that penetrating the adult food industry seemed unfeasible. Gerber tried to be innovative, but their own reputation prevented their attempts. Perhaps they should go back to the drawing board.
That being said, I think large companies in general do struggle to innovate. The problem, in my opinion, is that they have a "maintaining the status quo" mindset. A company has been doing things one way for years and it has been very successful and gotten a lot of people rich. They are used to working in a world of certainty. Being innovative would put them in a world of uncertainty. For executives who are feeling the pressure of meeting the demands of board members (and in many cases stockholders), entering a world of uncertainty is certainly not easy or comfortable. These companies that struggle to leave the "maintaining the status quo" mindset will never become ambidextrous in that they will only be able to build on the past and not create the future.
I am not making an excuse for big companies, but rather pointing to a common flaw. The size of a company does not prevent a company from being able to innovate. However, it does potentially make it more difficult. In order for a company to reach proprietary eponym status or get into the status quo mindset, the company must be a certain degree of large. However, this is a classic case of correlation not implying causation!
I think you hit on something here with the management being beholden to stock price and shareholders. Wholefoods and a few other companies seem to be getting away from shareholder value and moving towards stakeholder value (where key stakeholders are customers, employees, and shareholders). Given how much expenses can influence EPS, I can see a shareholder-centric paradigm being antagonistic to innovation in some companies, while stakeholder-centric paradigms appear more conducive to innovation. What do you think about stakeholder versus shareholder?
ReplyDeleteI also agree and feel that large corporations tend to focus on stock price and share holder value. I believe that large companies are just being risk adverse in order to avoid being exposed to large losses in market share. Companies tend not to veer away from their core business and usually look for innovation to grow their business. This is why I feel Apple is remarkable and truly innovative as they have entered industries which are not part of their core business (Music to wireless phones to possibly cable). Companies tend to too take on so much risk as the losses could be catastrophic.
ReplyDeleteGerber is a great example of the power of branding. They "are" baby food. So be careful how you brand your company. You need a position that your customers can identify with and that is flexible enough to work for your company over the years as your offerings change.
ReplyDeleteCompare Gerber = baby food to Apple = elegant design & easy to use technology. Gerber, by definition, limited itself to the customer demographic under age 3 or so. Apple's brand is not limited to a demographic and so can move in more ways.