established business vs. innovation

Chuck Murcko
Wed, 9 Jan 2002 15:32:20 -0500

Wouldn't this be better cast as a three-tier model?

-small guys (hungry, do R&D for raison d'etre)
-medium guys (grow or die, must/can't/won't afford R&D)
-big guys (contain small guy R&D outfits to keep moving ahead)

Just curious. I think your upper tier splits into a pure entity and a 
hybrid one above a certain corporation critical mass. Think 
GE/IBM/DuPont and the like. I'd suspect a lot of copy in the middle 
tier, less on the upper. Think Computer Associates and the like as just 
below critical mass or just dumb.


On Wednesday, January 9, 2002, at 01:11 PM, Dave Long wrote:

>> One more thing:  I will admit to a bit of bias in my argument:
>> established businesses are (usually) not innovators;  though I'm
>> far from having a convincing, general model of why this is so, it
>> seems clear to me that scale-up on other dimensions is inversely
>> proportional to ability to innovate.
> Bingo.  Much of my argument is based
> on the (observed) fact that dominant
> players are not innovators.
> Paraphrasing GKC, here is the general
> model of why this is so:
>   I believe what really happens in business is this: the old
>   firm is always wrong; and the new firms are always wrong
>   about what is wrong with it.  The practical form it takes
>   is this: that, while the old firm may stand by some stupid
>   business model, the new firm attacks it with some theory
>   that turns out to be equally stupid.
> Old firms are like bondholders.  They
> can usually make a small fortune, but
> every now and then discontinuity will
> wipe them out.
> New firms are like callholders.  They
> may usually end up with wallpaper, but
> every now and then discontinuity will
> give them fantastic returns.
> What is important is that scale-up on
> other dimensions does not affect the
> ability to innovate as much as it does
> the desire.  Basically:
>> the guys *with* the [existing business] are often considered to
>> "not be hungry enough" to make interesting things happen.
> The hungry guys try interesting things.
> The fat guys laugh at them.  (and do
> profitable things instead)
> Most of the time, the interesting
> thing fails, and LAUGH succeeds.
> Some of the time, the hungry guys
> LAUGH last.
> If this model is not consistent with
> both history and common sense, I will
> drop the entire argument, otherwise
> we can continue...
> -Dave
> ::::::::::::::::::::::::::::::::::::::
> quick summary
> =============
> established players are not innovators
> - establisheds play stable strategies
> - innovators play risky strategies
> so even in a transparent world, they
> will choose different niches
> (lions/hyenas)
> current objection
> =================
> 500 lb. gorillas will occupy both
> their own and innovators' niches.
Chuck Murcko
Topsail Group