My totally ignorant hypothesis is this:
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.
If I can add to this, I think there's something attractive to many about the large, stable, slow-to-steer ship that is a large company: often there's low expectations (relative to startups), you can get "lost in the bureaucracy", and rarely do you get to make a real, influential decision because of the incredible amount of in-fighting and empire-building above you, so you can coast. Taking a different angle to your conclusion, these conditions set up the departure from "how do I contribute to the company creating the best product ever" to "doing more than the bare minimum to guarantee my paycheck nets me a low/negative ROI". Not the ideal attitude for your team to have.
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?
There is a whole theory about how companies in different stages attract different types of leaders/managers. At some point they attract cut throat middle/micro managers that rise up and kill innovation and loot the company. The it dies.
Innovators, organizers, managers, looters and scavengers in that order.
My years of experience and observations confirm your hypothesis. Furthermore, managements don't take kindly to messengers (i.e. engineers) who deliver negative news, viewpoints. What I have seen is that over time, such companies leak competent staff at all levels. The Yes-persons outnumber those with critical thinking. The critical thinkers eventually give up and/or leave.
Everyone hates the fire inspector, but love the fireman.
The answers are as diverse as the companies. I think you'd find it more productive to search for past discussions on some of these corporate declines. You might also be interested in Stafford Beers' work on system theory.
Once a company gets to a certain size, it attracts people who put their own interests above the company's. They will happily make decisions that are harmful for the company as a whole if it benefits them personally.
It’s different for every company, but if we look at Kodak for example, the market shifted and they didn’t keep up. They developed a digital camera in 1975, so it wasn’t like they were surprised and didn’t have a shot. It is more likely that they wanted to protect their film business. They saw themselves in the film business, so as the need for film faded, so did their market share. Other companies filled the void.
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.
I wonder: Are there any examples of a large company successfully pivoting completely out of what had been its bread-and-butter competency?
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.
Netflix. Though it might have been the plan from the start, their bread and butter was the logistics around shipping DVDs to people, and the pivoted to lead the charge on streaming video.
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.
Calling Netflix a pivot is maybe wrong in my mind. It is same model in essence just done differently, renting content. From physical to digital which means lower overhead and you are just moving your own customers from one to other. Basically it is optimization of process not replacement.
Right, but they didn’t get stuck in the DVD business and fail like every other video rental service. They changed the business to serve the greater mission of letting customers watch a lot of movies, rather than thinking their job was simply to make renting DVDs easy.
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.
Suzuki is the best example I can find. They were famous for looms well before motorcycles. I'm betting the best examples will also come from Japan after WWII.
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.
Nintendo pivoted from cards to games but they likely weren’t huge before the pivot either.
So many, everywhere you look.
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.
Intel and Kodak both tried to protect their established market from technology advancements. Kodak had digital photo tech before others and Intel marketing dept held back core counts to force markets SKUs that were artificial. Apple and AMD helped burst their bubble.
Established companies become management bloated and squeeze out technical talent who have the temerity to push-back, critique decisions. Management focuses on the quarterly results and stock prices. For that reason, they do everything to sustain their cash cow products.
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.
Often, the market demand moves on from what the company is used to making, and institutional inertia makes it hard for it to respond to that change. Probably the most common reason. It's worth noting that big companies are simultaneously inherently dysfunctional and overfitted on their domain. Change is hard.
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.
Inability to pivot. That’s it and it’s a culture problem compounded by hiring the wrong people and fearing originality.
companies undergo natural selection much like organisms do. the difference is companies aren't made of cells, they're made of people. it's a higher level of abstraction.
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
Intel and VW have hardly "failed" - both the chip and car businesses will be around for the foreseeable future, and these companies will have some value going forward.
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.
Poor management and rotten internal culture
Ironically... Shareholders.
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.
They optimize themselves for a market that no longer exists while borrowing against a future that is not profitable.
Steve Jobs articulated xerox's failure well, which I think applies mostly to kodak, some to intel, and I've no clue about VW. tldr:
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!)
Kodak and VW both committed major environmental and ethical atrocities.
Cheers, M
Misaligned incentives + tragedy of the commons explains most of them.
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!"
i am sorry but why i cannot a submit new link ? i am new sorry.
Your submission (https://news.ycombinator.com/item?id=41606356) was killed because it looks like spam. Also, it's in Turkish. Generally only English language submissions are appropriate for submission here.
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!