How Companies Can Create Like Entrepreneurs, Invest Like VCs, and Install a Permanent Operating System for Growth
Let’s go back in time to the dawn of American capitalism. In the late nineteenth century – the days of the Rockefellers and Carnegies, of venerable mustaches and top hats – big business behaved itself. These were civic-minded, patriotic enterprises, which served customers and country. Businesses looked to provide a reliable product – say, good whiskey or a trusty tricycle – and preserve a connection with the consumers who bought their goods.
Then, in the middle of the twentieth century, something changed.
By the 1960s, American mega-corporations were focusing on accumulating profit rather than serving consumers’ needs. By this time, they were now more concerned with paying corporate executives massive sums than with fixing customer problems. The economist John Kenneth Galbraith diagnosed this situation in his book The New Industrial State, which claimed that big corporations raked in enormous profits at the expense of the betterment of society.
In response to this book, two economists, Michael C. Jensen and William H. Meckling, published an influential paper titled “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure.” They also railed against the state of American capitalism. But rather than encouraging corporations to serve customers better, they told them to look after their shareholders. Shareholders, who had been the lowest priority, were growing disgruntled when business suffered a dip in the late 1960s. Worried that their discontent could blow up the economy, many businesses took the advice of Jensen and Meckling and decided that they would prioritize shareholders above all else.
The shift to gratifying shareholders meant that business became completely detached from public or consumer needs. Many businesses became obsessed with shareholder appeasement, and abandoned any activity that didn’t boost stock prices. This meant that, naturally, rather than investing capital into developing that new car, computer or fashion line, businesses focused on cutting expenditures. The more efficient they became, the better the ratios were for shareholders.
There’s a great metaphor to illustrate what happened next. Picture a small mother-bird with a huge cuckoo chick in her nest. She forgets her own chicks, choosing to feed only the cuckoo, which grows ever more enormous. Similarly, businesses that once looked to serve their customers and grow their enterprises became consumed with tending to their shareholders. Consequently, they stopped innovating and stopped growing.
New to Big (2019) maps out how established companies can install a supercharged growth model at the heart of their enterprise. By adopting the structure of new start-ups or first-time entrepreneurs, they can fend off stagnation, reignite their creative flair and innovate to solve the problems of the future.
The future technologies, trends, and markets are not yet known, and they are changing far too fast for a traditional business-planning approach.
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Blink 3 von 12 - Eine kurze Geschichte der Menschheit
von Yuval Noah Harari
