> It doesn't make sense to take massive risks on an unproven business when you are actively making billions in a relatively non-competitive market.
which is interesting - because in almost all cases, it's this unproven market that end up upending the business. IBM is an early case, and now electric cars.
So if an existing, well capitalized business would learn from this, they should buck the trend and invest heavily in risky ventures. However, shareholders, esp. conservative shareholders, would not want their existing, certain profit lines be endangered.
I would recommend "The Innovator's Dilemma", explains really well why this happens.
In a nutshell, the argument is that successful companies fail to enter new markets because they have good management, not bad one.
In Ford's or IBM's case, a sane manager would not go invest in an unproven market, they rather maximize profits and growth on the market they are most effective at; however, this comes at a cost of missing new opportunities, which makes this a dilemma.
Successful companies could try to create little startups inside the big corporation; however, this rarely works out since you really need the entrepreneural spirit, align compensation to success and freedom without the restrictions of the parent company. The best alternative might be to create a VC arm that can serve later on as merger as acquisitions, but even then, is not guaranteed the startup would want to merge to the parent company nor that it would be the best decision.
People tend to think about this in binary terms but there are three options. Innovate even when you don’t need to, the Facebook strategy of over paying for any competitor that gets real traction, or the Newspaper approach of just milking a money maker into the ground then selling off the remnants. They are all completely valid and profitable options.
Facebook’s approach only works when regulators are asleep at the wheel, but standard oil style monopolies can just print money to cover these costs. Innovation is expensive and can fail regularly just look at Intel or most corporate R&D. Finally milking a dying business model can fail really quickly, just look at say blockbuster.
What is interesting so is, that digital cameras killed films, only to be almost replaced by smart phones. All that did kill, or considerably hurt, manufacturers of films and digital cameras.
EVs on the on other hand will, most likely, replace ICE powered cars. With the big difference that existing ICE manufacturers will just switch production to EVs and will be just fine in the new EV world. I do see multiple case studies in that.
which is interesting - because in almost all cases, it's this unproven market that end up upending the business. IBM is an early case, and now electric cars.
So if an existing, well capitalized business would learn from this, they should buck the trend and invest heavily in risky ventures. However, shareholders, esp. conservative shareholders, would not want their existing, certain profit lines be endangered.