Why Do Big Companies Fail?
Big companies at times are considered unstoppable. People suggest that the company will last for generations and yet some fail in matter of a few years. How can such large companies fall so quickly?
Disruptive technology are products that are intended for the lower end of the market. In turn, large companies tend to ignore them due to low margins and low profits. Also, they are avoided by large companies because these companies do not focus on the current customer base focused on by large companies. In turn, they usually have the ability to grow without the interference of these large companies.
A clear example of this would be air conditions. At first air conditions were considered extremely expensive by several customers, therefore it did not sell a lot. A better alternative was a fan which was very cheap and already had an established customer base. However, air conditions started to attract the higher end of the market and began competing with the traditional fan. It reached a point where air conditions were chosen over fans. Overall, large companies tend to fail because they do not pay attention to disruptive technology and only focus on their customer base, leading to a decline in sales.
Also, another example could be BlackBerry and the iPhone. BlackBerry completely ignored the iPhone when it first came out because they believed that it would fail in the market. However, this was not the case and it became extremely successful.
Overload of information
Large companies have to consider a lot of information to be successful. The key to success for most of these companies is spending the time and resources on the right information/situation. It’s like studying for an exam. It is more efficient if you study the important information. It saves an individual time, allowing them to do other activities. However, if skipped information comes on the exam, then it will be very problematic and stressful to the individual. Today, companies are trying to be as efficient as possible because of the rapidly changing business environment. Any business will fail if they are unable to use their time and resources efficiently.
Size of Company
Large companies at times might find it tough to make quick decisions. The reason to this would be that a certain recommendation needs the approval of several individuals/shareholders. In turn, the effectiveness of the recommendation might wear out because the business environment has changed. The size of the business might affect its ability to take risks as well. A manager would not want to do something different or take risks because they would want to maintain their job. Overall, the inability to quickly react might occur with large companies, resulting in them falling behind and managers not willing to take risks to avoid being fired.
Large companies fail because of disruptive technology, the inability to handle the correct information and its inability to implement quick recommendations. Some methods such as creating an independent branch outside the company might allow it to make quick decisions without influence from shareholders. This can be evident in the Rise and Fall of Blockbuster, a company that was once worth over $2.5 billion. Also, large companies can acquire small companies that might be considered disruptive. Overall, it depends on the ability of the company to quickly adapt to the changing environment and come up with quick solution to a problem. If the company is unable to adapt then it will undoubtedly fall behind.
Writer: Syed Azam Afzal
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