Large companies can create innovation but can’t scale it

Many people think large companies are not able to create innovations but that is not true. Kodak invented the digital camera. Blockbuster built a video on demand solution. Tons of telecom operators created clouds, app stores, social networks, … Many investment banks invested heavily in blockchain. So why is it that we do not see the outcome of these innovations?

Customers are a problem

Kodak asked professional photographers if they wanted a digital camera that made low resolution pictures and they all said no. All automotive brands have done surveys for years and consistently found that electric vehicles were only requested by a very small percentage of customers. Nobody is asking for self-driving robot taxis. Banks asked clients about blockchain payments and investments. Existing customers are not interested because new technologies are often inferior to previous solutions when compared to the main features desired by these customers, e.g. charging time and distance are still a big problem for EVs, blockchain until recently could only handle 5 transactions per second compared to Visa’s tens of thousands,... Often companies have an innovator’s dilemma and do not realise it.

Channel conflicts

A company can open a website and sell its products directly. For a new company that is excellent but if until recently you used channel partners to do most of the selling for you, then switching over from one day to the next is extremely risky. Transitions often take many years and allow for nibbler competitors to come in and take over the market.

Management is often the bigger problem

The innovator’s dilemma and channel conflicts are solvable but often management are standing in the way instead of being part of the solution. If you spend the last 30 years climbing the corporate ladder from factory floor to VP of internal combustion engines, you are not going to support any radical move to EV. Publicly you will talk about EVs as the future but privately you will make sure EV projects go slow or even nowhere.

People have a tendency for self preservation and as such will put their career first even if it means destroying the future of the company in ten years time. Many CEOs are pushed by Wall Street to focus on next quarter results, not on a better five year future. Their career at the company will be over in three years in many cases so why worry about the future. Anybody who ever tried to push a company into a direction it does not want to go will tell you that they committed career suicide. This is why many successful entrepreneurs leave large companies, or often are forced out. If you cannot make it happen within, you have no choice but to innovate at the outside.

Another problem is the lack of capabilities to create new businesses. Companies who have been in industries which did not see any radical changes in the last decades, do not know how to start and grow businesses from zero to billions. Creating a business is not the same as making a PowerPoint and following a project plan. It involves small teams making lots of mistakes before they finally get it right. Large companies throw around large budgets that cannot fail. Teams are structured per department which is super inefficient to try many different trial and error scenarios.

Lack of technology skills at the top are often also a problem. The top management have always been people managers, not experts in artificial intelligence for instance. So anybody proposing to do away with thousands of actuaries, stock traders, advisors,... and substituting them by algorithms will be seen as crazy. Experts in an old technology or way of working are often the last to move to a new technology, e.g. IBM, HP, Dell, Oracle, SAP,... came late to cloud computing because they did not believe it would be successful. Experts can give you a thousand reasons why a new technology will not work but have a hard time imagining ten new applications of the disruptive technology.

The next disruption

With old companies ill-prepared for a future of smart contracts, backed by artificial intelligence, automating the world through thousands of sensors and actuators, connected via satellites, we are going to see disruptions at an unknown scale. Autonomous trucks, trains and boats will soon transport raw materials everywhere. Robot factories, 3D printers and other automated manufacturing will produce goods on demand, totally personalised and right on time. Payment will be token based and so will identity and health validation, all enabling business processeses to know just enough about humans. Why share your home address, phone, email and birthday with a company if the only thing they really need to know is the size of your feet? Crispr based medicines will allow personalised vaccinations based on a drop of blood. Soon all types of body implants will be able to enhance your capabilities or keep you healthier. You will no longer be able to distinguish if you are talking to a real human or a machine pretending to be one, inside an alternative metaverse. Your next virtual appointment with your lawyer, doctor or financial advisor can be with their digital twin. The food you will be eating will be plant-based and printed, even if it looks and tastes like steak. You will be able to slow down aging via pills. The house you live in will be printed. The cloths you wear will be cheap and tailer-made. Movies are made without harming any actors in the process. You will no longer own a car but just have a subscription to robot taxis that drive or fly you everywhere. You take a rocket to go on holidays to the moon. Your smartphone will be substituted by your smart glasses or implants which will project directly into your eyes or brains. Want to speak a 100 languages, that will be just a software install away. Physical money will be something your kids will laugh about, similar to you remembering the days of VHS. The energy you use will be collected from the sun or wind, stored in batteries or converted to hydrogen for long-range transport. With decentralised energy production, you no longer have one energy supplier but thousands.

None of the above mentioned innovations will take more than one or two decades to materialise. By them coming together in such a short time frame, can you now understand why the old business model of one global HQ, where you go-to-the-office from 9to5,... way of working is sounding obsolete? The way we organise work can no longer be centrally managed by a chief X officer who expects us to follow yesteryears business processes while the rest of the world is being transformed at an unseen pace. You are likely going to work for different companies every day. Companies that do not have a scaling problem because they have been built to be decentralised and to dynamically scale. There is no problem in the fact that large companies do not know how to innovate because we will soon find better ways to organise work. Large companies will be like VHS, useful at the time but easily disrupted by Netflix and the likes. Many professions will disappear, e.g. lawyers, politicians,... Why would we need highly paid individuals to debate, write and look at paper-based laws and contracts if we can automate the rules through smart contracts and decentralised governance voting? The future is almost here. Are you ready for it?