Once upon a time, those delineations established a fairly clear-cut world. Car companies made cars, and they were in the automotive industry. Phone companies ensured that we could speak to one another over great distances, and they were in the telecommunications sector. Broadcasting companies made television shows, and they were in the media sector.
Everything was neat and orderly. Analysts could easily categorize companies and tell the markets what they were worth, boards could oversee firms with a view to shareholders’ happiness, and all was right in the world. Until it wasn’t.That world – in which clearly defined sectors enable easy classification of what a company does – is disappearing before our eyes. Is Apple a technology company or a luxury watchmaker? Is Google a search-engine firm or an up-and-coming car company manufacturing driverless vehicles?
But, for every Apple or Google, there are companies that seemed innovative but became obsolete or fell behind. Kodak and Nokia, for example, provide a cautionary tale for companies that began life as innovators.
Nokia, in particular, was long held up as a case study in corporate reinvention – the very epitome of constant, top-to-bottom change. Here was a company that entered and exited sectors as needed: paper, tires, rubber boots, and telecoms. And yet it has lost its way; with the sale of its mobile-phone business to Microsoft, many doubt that it can recover and reinvent itself yet again. (Of course, even if Nokia has run out of road, its loss may be Finland’s long-term gain, as startups begin to blossom from the minds of the company’s highly skilled ex-workers.)
Many traditional companies, too, have fallen behind because they hewed too closely to their traditional definitions. Like Kodak, other storied brands have not innovated: Polaroid, Radio Shack, Borders, Aquascutum, Blockbuster, and the list goes on. Their managers thought they were doing the right thing: not losing sight of the “core business.” Their board members knew the industry and had all the right credentials to oversee the managers.
But both managers and board members were wearing blinders. They did not make room around the table for those who could see that the company’s destiny did not lie only straight ahead, but also off to the side.
by Lucy P. Marcus, Project Syndicate | Read more:
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