Why do we see so many large companies missing the bus while smaller players are able to better judge the market?
Why does the effort and perseverance of few people work but the professional management does not?
One part of the answer lies in the company's decision-making process (or the lack of it). What are the controls (if they exist) within a company and what is the overall company culture.
Startups have absolutely no controls and everyone has an opinion on things. But, in a large company, these voices die in the crowd (or are killed due to culture). Decisions are made by people who are really busy in daily operational activities. Moreover, many different people take many small decisions. And there is no one to take a large decision which is very important in case of major industry shifts.
Another reason is the investors. The nature of investors in a startup is very different from that in a large company. In a startup, investors consider failure a probable option. But, investors in a large company invest for steady returns. Investors in a large company tend to steer the company towards a path where company can earn more profit in near future without keeping long term gains in mind. It’s common for a large company to favour small definite profits in the near-term as against long-term huge risky profits. Risk-taking is avoided in a large company though they are best positioned to take these risks.
Moreover, these investors are generally financial experts, not industry experts and definitely not visionaries. They tend to underestimate the major industry trends & dramatic shifts. VC (Venture Capital) and PE (Private Equity) firms who invest in startups and small enterprises are known to hire industry experts. But, the Investment Institutions, Mutual Funds & Wealth Management firms don’t do that.
