Monday, June 19, 2017

Why Good Companies Fail

The article “Why Good Companies Fail to Thrive in Fast-Moving Industries” was very interesting.  It was surprising to read that good management was the reason why good companies failed to stay atop of their industry.  This is contrary to everything I have read in the past and an interesting perspective.  Usually everything we learn in classes or read in articles is about how management is the key to success regardless of what industry the company is in. 

The principles of disruptive innovation are important to follow for managers when disruptive forces are present.  It is important to alter one’s strategy for the situation and not rely only on a set of well-established management principles.  It’s the rise of disruptive technologies that creates a dilemma for successful companies.  In today’s world of technological innovation, it seems that the first one to create a new innovation can capture the market and increase their chances of success in the beginning at least.  The article talks about how companies sometimes invest too much in technology and actually overshoot the market.  A great example of this was Motorola and satellite phones.  Sure the technology was cutting edge at the time and better than cell phones, but Motorola overshot the market.  They invested heavily in satellite phones and with a several thousand dollar sale price, there was very little market for them to make a profit.  The cell phones at the time were unreliable and unsophisticated, but this type of phone was the one people could actually afford to buy.  At that time, cell phones were the disruptive technology that were simpler and cheaper.  Now in 2017 we see that cell phones were indeed the future. 

The first principle, companies depend on customers and investors for resources, can be tied to Motorola as well.  The article states that “companies with investment patterns that don’t satisfy their customers and investors don’t survive.”  While Motorola did survive the satellite phone failure, it never became the dominant player in the cell phone market that it could have.  Motorola was spending millions of dollars on technology that the average customer couldn’t use because of price alone.  However, their average customer could use cell phones.  Had Motorola listened to their customers they potentially could be the Apple of the cell phone market today with the success of the iPhone.  

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