A big problem is that these [big] companies tend to treat nascent opportunities the same way that they approach established businesses. They want data, even though data on non-existent markets is inherently fictional. So they focus on the market as it is today, where data are more easily obtained, and they employ the most conservative estimates about new sources of growth. They may also concentrate exclusively on what their customers want, which biases them toward incremental improvements of current solutions. As Henry Ford reputedly said of his industry, “If I had asked customers what they wanted, they would have said a faster horse.”
When they do go after an idea, big companies can pursue it so cautiously that opportunity slips through their fingers.
Entrepreneurs follow a different path for a simple reason: they have to.
A great analysis, which in turn generated a couple of other questions I’d love to see addressed in a follow-up, including:
- What happens when the Big Company buys the Small Company to “Level Up” in product innovation?
- Should the Big Company even try to pursue product innovation in the same manner that the Small Company can? Can the Big Company innovate in the way the Small Company can?
- Is the role of the Big Company to be the ones to buy the small company when the technology gets to the right place?
- Is it better to approach Small Company as a Strategic Partner or to buy them outright? What happens when the Strategic Partner Small Company turns into a Direct Competitor Small Company?
- This type of behavior is well established in Big Pharma … the Small Company does most of the preliminary development and shoulders nearly all of the risk. When the product/medicine progresses far enough, the Big Company buys the Small Company, essentially trading their in-house R&D for M&A. What can the broader business community learn from this? When is this not the right model?
- Full disclosure: I work for one of those Big Companies. That said, any opinions expressed or inferred from this post are solely mine.