Ask HN: Kodak, VW, Intel – Why big companies fail?
Understandable for startups - product isn't something anybody needs or not enough cash but why big companies with a proven product would fail?
Your observations?
Your observations?
When a company becomes successful, salaries increase and company reputation improves.
This obviously increases the incentives to get into the company, which in theory should be good: more people want to work there, so the company has more options to choose employees from.
But this pay and reputation increase disproportionally attracts the kind of people that don't really care about doing a good job or creating an exceptional product, but only care about the money and status.
If the company lets these people in, they will slowly destroy the culture that made the company succesful in the first place. The general feeling goes from "how do I contribute to the company creating the best product ever?" into "how do I get a promotion as fast as possible?"
But that's just my personal hypothesis that isn't supported by hard data.
Innovators, organizers, managers, looters and scavengers in that order.
I'm in an org at the moment and I'm watching new layers of middle management being created, excess processes being introduced, ICs being disempowered, consultants being engaged over in-house, eye-watering dollars being pissed away while penny-pinching on things that keep the lights on, etc. I have to wonder what are the conditions that mean these (what I consider to be) mistakes can go on for years before a company actually begins to be seriously impacted? Is it actually extremely difficult to kill a large enough org from the inside once it has enough momentum, provided the org avoids doing anything particularly stupid? I can't actually think of something an org has done that was particularly stupid and resulted in its end. Do big companies even fail?
When you're on the quarter to quarter results rat-in-a-wheel cycle it's easy to forget about the future.
As the product pipeline dries up, shareholders pull back. Leadership either doubles down on the short term to win back shareholder trust (and further neglects the future) and/or leadership is limited in new directions as share prices drop.
Rinse. Repeat.
Live by the shareholder sword, die by the shareholder sword.
People do not seem to realize that the goal of any public company is not to create great products, but to make shareholders happy/rich. To the point that management can get into legal trouble if they make decisions with any other goal in mind.
Therefore big companies don’t just fail because of the size, they usually fail when market changes significantly and they can’t adapt (kodak is a perfect example). Some though manage to fail even before that (because people), and some are able to survive market shifts (luck, some good people still around etc, enough money and monentum to fly through turbulence etc).
Kodak got hit again when the smartphone launched. They carved out a ok niche as having some easy to use digital cameras, and the disposables were still semi-popular, but the smartphone effectively killed the point and shoot camera.
They had time to pivot in many directions, and failed to do so in any meaningful way. It’s a good idea to make sure a business has a clear vision that isn’t dependent on a technology, so it can evolve over time. If instead of film, Kodak focused on something like, “capturing memories.” That leaves a wider door open for digital cameras, video, smartphones (or partnerships/licensing), printers (which they do), but even into cloud services and software. Cloud storage, photo management, sharing, etc. Humans have always had a desire to capture memories, so the vision would never die, just change formats. From etchings on a cave wall to photorealistic 3D printers of today. They don’t even have to limit themselves to visual media either. But they got stuck on film, it is what it is.
Kodak was never really a camera company, they've been a chemical company their whole time. Indeed industrial chemical sales make up a significant chunk of revenue to this day. Kodak was actually pretty aware that the film business was on its way out they aggressively hit the digital market in the 90s. They had the first DSLRs in the 90s and the first commercially available full frame DSLRs. They also had the first commercially successful line of digital point and shoots, starting from a partnership with apple in the early 90s. They had moderately successful digital point and shoots through the digital points and shoot heyday. However, it wouldn't have really mattered even if they won the digital camera market, at its peak the total market was still a fraction of just Kodak's film business.
They were technically beat to market just barely, but Kodak was the first to deliver more than pre-orders.
I was going to say 3M, because they were originally owned a mine, and had to pivot when the ore was too low grade. But they weren't a large company then.
You could argue that Apple did with the iPhone, but it was only half a pivot, since they're still in the desktop business too.
So don't be too hard on Kodak. They had plenty of time (and warning) to pivot out of film, and they didn't, but very few firms successfully do that.
AT&T. They basically owned the phone lines, but rather than getting stuck there they were able to transition to cellular and fiber. I thought they’d get stuck for a while when their slow DSL over the old phone lines was looking bad next to cable, but now they are trying to get the government to stop serving some old phone lines.
If a company does it well, it will feel more like an evolution or diversification, rather than a hard pivot. Think companies like Disney who are into everything, so where they started is such a small piece of the pie it doesn’t matter all that much. Or IBM where they transitioned from analog to digital business machines.
I won’t claim keeping any business going is easy. Very few are able to stay relevant for decades, or a person’s lifetime. Those that do are the ones that evolve and reinvent themselves over time, generally speaking.
It seems natural, because they did it well, but look at Blockbuster. Imagine if Netflix stuck with physical media, and then Hulu came out. Netflix would have been toast. Maybe they would have acquired RedBox to hang on for a while longer, but ultimately physical media rental would have only taken them so far.
Netflix was willing to cannibalize their own DVD business for the future streaming business. A lot of companies aren’t willing to sacrifice their golden goose for an unknown future.
Apple has been good at this as well. The iPod was most of their business, and then they released the iPhone which effectively killed the iPod. Then they released the iPad with the expectation that it would eventually take a huge chunk of the laptop market. If a company evolves well and is willing to cannibalize their own products, they don’t need to take the radical Hail Mary pivot.
Looking back the iPhone seems like a pretty natural evolution for Apple, but compare that to Microsoft. They missed the boat, had a few false starts, and effectively missed the entire move to mobile. They’ve made up for it in other areas, but a few big misses like that and companies die. Look at BlackBerry; they botched the move to the modern smartphone and were done. They were too worried about hanging onto the past and trying to carry it forward in some way. It doesn’t seem like a big pivot to make for a phone company, but it was enough to sink them. Nokia too… a shell of what it once was.
Netflix might be a close second because it went from managing warehouses full of DVD's to streaming and producing original content.
Microsoft and Amazon all belong in same camp as Apple. AWS and Azure are big profit centers.
Microsoft started out with OS, branched into Office, branched into servers, branched into Azure.
Apple started with desktop, branched into phones, earpods etc.
IBM went from hardware to services.
Just because a company pivots, it doesn't mean they gave to set fire to the old business. It means they move on from it -keeping it alive, while embracing the next step. Apple still sells desktops but that's a tiny part of the business. The still sell laptops but that's a fraction of the appstore business and so on.
Google still does search, but is slso YouTube and Gmail etc. They are investing in AI which may turn out to be a search replacement.
Most businesses are always moving forward, moving to the next thing. It's not "pivoting" or abandoning old things, it's about embracing the new.
We're hard on Kodak because they saw the future and promptly pretended it wasn't going to happen.
1. The decision process (and culture) that helped a product/company reach a big scale is basically saying no to any real innovation
2. Disruptive innovation is hard to identify because initially looks more like a failure according to the metrics/criteria from point 1 so it is ignored until it is too late.
I would add here a third point (not from the book but more a personal observation): When a company reaches a big success founders most probably evolved personally with the company. They created the company but also the success of the company created them. To innovate means also for founders to disrupt their own lives, world views at a more fundamental level. And as in most cases this is hard because they lived that company life eveyday.
Then some maverick startup comes along with some disruptive innovation. Give consumers something novel, cheaper, easier to use than the incumbents and you have a new growth market.
Sometimes, a company will start taking its position for granted and start optimizing for profitability at the cost of customer satisfaction. They assume their position is secure, while it actually isn't, and then they are dethroned.
Other times some bad but reasonable enough decisions turned out not to work so well.
I don't know where you live, but around you how many companies do you see that have lasted 5 years? 10? 50? 100? 1000?
Even countries have definite timespans.
Intel has already lasted for more than 50 years (and its demise is not imminent). This is a remarkable achievement for a technologu company.
In 5 years, Nokia went from 50% smartphone marketshare to < 5%.
Markets seem to think VW has serious issues, as shares have lost more than half of their value since 2021-2.
Kodak is a different and sad case. There are so many think-pieces on why they failed, but this one captures it well, by comparing them to their peer Fujifilm (which didn't fail): https://petapixel.com/why-kodak-died-and-fujifilm-thrived-a-... TLDR - Fujifilm quickly (over 10 years) diversified out of the photography business, while Kodak lingered. Digital photography was never going to replace the empire they had in film - the core photography business was fundamentally doomed, and the senior execs didn't make enough changes quickly enough.
As a counter-example to Kodak, look at IBM, which has reinvented itself several times and is now basically a software service company. IBM successfully pivoted away from failing core businesses and has kept on going (although talking to former IBMers, it was hardly a smooth ride...) You could say IBM failed several times too - but like Fujifilm, it managed to morph into new businesses so the ticker at least stayed the same.
in the case of kodak, their cameras were simply worse than competitor's cameras. either kodak must die, or it must kill parts of its current product and make a better product. to give a biological analogy, it would have to cut off a limb and regrow the limb to stay viable. it's very complicated and risky to do that kind of surgery
Sales and marketing were the main groups who could impact the company's bottom line. So those were the folks that got promoted and pushed to the top. When they lead the company, they don't focus on products+innovation. Because they failed to innovate (or capitalize on their innovation - e.g. their gui) competitors did (e.g. apple).
They fail to make great products.
See https://www.youtube.com/watch?v=NlBjNmXvqIM (I recommend watching this, its short!)
Cheers, M
At small scales (up to maybe 10 employees) the individual performance of employees is fairly directly tied to their compensation. If they do well, the company does well, and they get paid because of that. Even a single employee doing zero productive work can be such a drain on profitability that it can make or break the entire company. Hence, everyone has to contribute to the productivity in a positive way.
As companies grow through medium size (100-1000 staff), the employees can get away with being unproductive or even counterproductive. This is because efficiencies of scale start to materialise in a big way, compensating for even a fairly large subset of employees basically doing nothing useful. That merely decreases profitability to just 10-20% instead of the 60% that ought to be possible, which isn't catastrophic by itself, hence it is allowed to persist.
As companies grow past 10K staff and the decades go past, the real enshittification begins. More and more managers at increasingly senior levels are now there purely to convert "the commons" (the communal value of the company, such as customer goodwill) into personal profit. For example, a hypothetical company that has the motto "Do No Evil" might have a manager attain promotion to higher ranks through a just a bit of evil. This is basically "cheating", which works, so they get promoted. They're a senior manager now. Rinse and repeat until all senior managers obtained their position and power over the organisation this way. Now the entire organisation is evil because everyone making the decisions is a self-interested cheater instead of a hard-working product builder.
This is how you get ads in the start menu of an operating system you paid for. That got one guy a promotion, at the expense of a trillion dollar business.
You, the customer, will now seriously start considering switching to a different operating system, along with millions and then eventually billions of other similarly upset customers. All because of one guy. One! Eeeexcept... it's never just one person. It's now every manager doing the same kind of self-interested evil thing, destroying the product through a million tiny cuts. That's the tragedy of the commons: "We all just have one cow, what's the problem? Oh everyone's cow fed there and now there's no more grass. Oops!"
But since you are here, I have to ask: How did you find this site? Why did you submit that link? What do you think this site is for? Have you read the site long enough to understand what we're about?
I always wonder what new posters are thinking when they submit something like that, and maybe now I can find out!