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Comment by magicloop | Hacker News Reader

Actually that is the "Innovator's Dilemma" in action. Managers will always prefer to safeguard and enhance the high margin aspects of the business and discourage/under-invest in low margin disruptor aspects of the business due to cannibalization of profits and thus missing profit guidance for the quarter (thus losing compensation personally). They knew the tide was changing but organisation dynamics prevents a course correction.

Only a few companies can buck the Innovator's Dilemma, usually only founder led enterprises with significant control.

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> missing profit guidance for the quarter

The Innovator's Dilemma isn't about missing quarterly guidance. The dilemma is that it's perfectly rational and profit maximizing to continue focusing on your cash cow even when obsolescence is a foregone conclusion. It wouldn't be a true dilemma, otherwise.

The incumbent is the only player that can maximally squeeze the very considerable remaining profits from old technology, and they should do so with gusto. Moreover, switching to new technologies comes with more risk, even when it seems obvious what the new market will look like because the old market has almost zero risk--it's completely proven.

All the "solutions" to avoid the dilemma, like selling the old technology to take future profits and then pivoting to the new market, are just corporate branding shell games. They might even be in fact sub-optimal, but in any event the fundamental dynamics remain the same.

Except it didn't actually work out. It worked out at the time, and thus was "perfectly rational" then but rationality should not have a limited time horizon because then it is limited. This is the problem with short-term thinking, it eventually leads to loss.

What value is there in corporations being immortal? That is, why forego substantial and easy profits merely to exist as the same corporation further down the road?

There are transaction costs to creating and building a corporation, but do those offset the clear costs of leaving money on the table, especially in the modern world of highly liquid capital, and particularly in markets with clear technological breaks. The lesson of the Innovator's Dilemma is that very often the perfectly, unqualifiedly rational decision is to press your advantage to the very end. And importantly it not only maximizes short-term profits, but implicitly it maximizes long-term profits globally by most efficiently allocating resources. Why waste energy swimming upstream when there are endless fish spawning and starting their journey upstream already along with ample resources of their own.

There isn't anything particular about a company being immortal. The issue is now. No one wants to be there when a company is dying. There's nothing heroic about "going down with the ship" in the corporate world.

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