The final advice is "invest in tech stuff, because there's a lot of opportunities in the old big companies". That's true, but there's some stuff in between about the old big companies being doomed (as in Oil companies going bankrupt). I don't really agree with that reasoning.
The thing I don't quite know is how the tech culture is going to generate a replacement to Johnson&Johnson in the next 20 years.
Unilever bought dollar shave club, right? So that's good for investors. But if all the big companies buy the successful unicorns.... didn't the big companies win? A win/win, sure, but not the "GE is finished" sort of opening.
I think that a core argument here is that SV can come in and eat these conglomerate's lunches in certain verticals. But that's fine! So many of these companies are in so many domains that having one division go to zero is something that's happened at the beginning of time, right?
So there's an argument that going against these huge companies is a Good Idea(TM). But the success of the SV company does not mean the collapse of GE/J&J/Coca-Cola. Not to mention Wal-Mart.
Amazon is a good counter-example to what I'm saying, as it has taken significant market share from so many different industries. I wonder if SV really has the guts to make "real" capital investments like with Amazon again.
Space X happened because a billionaire just through all his money in, but the "traditional" financing companies (banks) are making those kinds of big bets all the time! I think we're still a ways off from capital-intensive startups ("real money") from getting those. Especially with the 20+ year lead time necessary.
I kinda see the argument for oil going to zero, but transportation is only 1/3rd of oil expenditure. I think Exxon-Mobil will still sell stuff for a while.
I totally agree! Also, there is plenty of variance and random luck in the fate of companies. Kodak went down, yes. But many other similar companies survived and thrived. GE once sold personal computers and 3M, magnetic tapes. But they successfully extricated themselves from these businesses when they became difficult to profit off of. While there are certainly deterministic reasons for this, one shouldn't discount the effect of luck. People forget how diversified these companies are. The positions they themselves hold, in terms of markets, are hedged- with short and long bets. Just because they are hedging their bets more by buying Dollar-Shave-Clubs and Jet.coms doesn't mean there's a bubble.
Additionally, on the tech/start-up side too, there were many shorter-lived companies that never lived up to the hype or declined from a position of unrivaled greatness (Cray?).
If there is a fatal error in the OP, it is in the certainty and needless cocksureness of McClure's predictions.
Given the huge sizes of these markets and the value of products and commodities, it is laughable to predict an imminent decline in companies that do pharmas, chemicals, industrials, medical devices, etc. based on metrics cherrypicked to create such a narrative (e.g. shift in highest-revenue companies).
> They’re about to get disrupted by a unicorn / comet.
Assuming they just sit still, sure. But large companies aren't uniformly run by Hollywood stereotypes.
More importantly: Large companies don't need to be better than startups to crush them. They have the depth of finance to sustain a brutal fight.
They only have to be good enough to hold the line. Attrition will do the rest.
Add to which, a lot of F1000 companies have decided that disrupting their existing F1000 competitors seems like a jolly good wheeze and have been studying up on this hunky-funky agile and lean thing.
Disclosure: I work for Pivotal and in Pivotal Labs, we've seen a massive surge in interest from F500s who want to learn to dance. Some of them are quick studies, too.
I've seen some of the results of what you guys teach -- you do good work.
This is also the first year that I've regularly had senior executives and C-suites (as opposed to tech) ask me about agile as a qualifying or competitive factor. I'm always nervous when process becomes a qualifier (due to the "best practices are no magic bullet" expectations management it requires, often in the face of the competition's unwarranted claims), but I'm happy to see plenty of F100+s thinking about how to effectively innovate within their core markets without throwing $20m waterfalls at the problem.
To tell the truth, we've had to re-learn how to teach in the past few years. Pivotal Labs used to work almost exclusively with startups -- a scale at which transforming most or all of a company's work is possible in a single engagement. When the students are all willing and present, teaching is easy.
Now we work with a lot of enterprises, most of whom by employee headcount outnumber us by 10-100x : 1. We can't boil the ocean. We have to do it a piece at a time.
Often the C-suite are converted after just a few visits to our offices, or after talking to our various office directors (nearly all of whom have come from frontline engineering, product management or design). And typically the engineers, product managers and designers we work with are quick to see the benefits too.
But these companies are very large and sometimes the incentives are highly heterogenous across different individuals and departments. But slowly, surely, they change. And even when they don't completely change, it only takes an isolated pocket of fast movement to keep a large company in the game against disruptors.
That said, we've found that after a while, the ideas and practices begin to spread by themselves. A good example is The Home Depot, with whom we've had several Labs engagements now. Cody, from THD, even gave a tech talk about our NYC office about the experience: http://original.livestream.com/pivotallabs/video?clipId=pla_...
Unfortunately, we flubbed the audio, so Cody is a little hard to hear, but if you can hear -- it's a great story.
The moment someone suggests that their advantage is being smarter than everyone else (or that everyone over 40 is somehow stupid), I look for ways to short them.
I know a handful of F500 execs, and they are formidable. Sure, they may turn to IT to set up their new "iPhone BlackBerry", but they have tools in their belt to compete with that most valley entrepreneurs don't even know exist.
They were the best, brightest and hardest-working of the previous generation. They are us, with more life experience and better networks. Underestimate them at your own peril. They might be dinosaurs, but who wants to jump in the ring with a velociraptor?
Saying a large company has trouble innovating isn't necessarily a criticism of the executives. Large bureaucracies are cumbersome, certainly more so on average than a smaller company.
Let me offer the analogy of a big, old software project. It is far more difficult to make a major refactor of some 20-year-old, millions-of-lines system than a script you wrote yesterday. That's not saying the old project was incompetent. It could have been very elegant, the best engineering of its day.
You're roughly describing the Innovator's Dilemma, which is an entirely different beast (and definitely not what the author of the linked article is referencing.)
No, I'm not describing the Innovator's Dilemma. That's essentially the problem of getting stuck in a local maxima and the need to take a temporary loss to find a bigger hill, so to speak. I was instead trying to describe the troubles of maintaining an old system. They're intricate and all fixes must be hot-patched. Now, if you could just reboot...
For example, suppose you're at a large enterprise that has a silly expense policy involving taping physical receipts to a standard size paper, one receipt per page, then mailing the packet to India, where the pages get scanned and sent to the accounting department, which meticulously compares the receipts against the Excel spreadsheet you filled out and submitted via VBA macros (yes, this is a true story). How easy would that be to change? Compare that experience with working at a 20-person company and asking the accountant if she doesn't mind using Expensify.
Saying that a big company is hard to change isn't necessarily an accusation that the CEO is myopic.
As for what McClure meant by saying public companies will be disrupted... I'm not really sure, since he also contradicted himself saying that they'll purchase their potential disruptors. Perhaps he meant that large enterprises which do not acquire new companies will be out-competed by those who do. That's somewhat of an interesting assertion, but I don't know of any large enterprise that has only an M&A team or an R&D team. They all have both.
Ok, to put it differently, the Innovator's Dilemma was the interpretation of your description I could most easily agree with. It's also valid, because that local maxima can also exist in a software project where maintenance has a greater short-term payoff than refactoring.
In that case I'm sticking to my guns and just disagreeing with you. Many companies are horribly operationally inefficient in many ways, but they often don't care if it's not actively costing them significant market share. The moment that expense report process starts impacting the bottom line you can bet they'll be on the cutting edge of resolving it.
> Many companies are horribly operationally inefficient in many ways, but they often don't care if it's not actively costing them significant market share.
My experience suggests otherwise. Big organizations are bureaucracies carved up into little fiefdoms, each little lord trying to maximize something different. The boss of the receipt scanners wants to increase headcount, not reduce costs. As a management consultant, I encountered that situation time and again -- an executive choosing an outcome worse for the company, knowing it'd be better for him or herself, or simply out of pride, laziness, or malice. There's a reason why Dilbert rings true for so many office workers.
A new CEO can try to clean things up, but they can't fire all the middle management simultaneously, so the ship turns very slowly. Going back to the software metaphor, it's not the issue of short-term vs long-term thinking on patch vs refactor, but the problem that the system is live and must be highly available during maintenance.
> A new CEO can try to clean things up, but they can't fire all the middle management simultaneously, so the ship turns very slowly.
Firing all middle management doesn't help: humans are self-interested. What a CEO needs to do is align incentives for middle management with the interests of the firm, so that self-interested middle managers aren't microoptimizing their domains on criteria that don't serve the interests of the company.
That's a good buzzphrase, but I've never seen anyone do it in earnest. I was once on a consulting project to help a "Director" pick appropriate KPIs as part of a company-wide effort to improve departmental performance measurement. They rejected my suggestions to measure their effect on profit. My manager, to rescue the project, told me to ask what they wanted to be measured on, write it down, and hand it back as the report. The Director loved that idea and rattled off a list of metrics that could be easily sandbagged and had no clear relationship with company profit. ... And yes, that company is very large and well-respected.
The moment someone suggest that their advantage is being older than someone else (that everyone under 30 is somehow stupid), I look for companies that will disrupt them.
Only a handful of formidable execs are not stuck in a bygone age, but are still scowling at these tech millennials pulling in millions of revenue because they used unorthodox business methods.
The previous generation needs to catch up. Adapt or begin dying at your own peril.
Except that the older generation doesn't deny the fact that Millennials are smart, clever or innovative. That's never been the problem. On the contrary, they work hard to exploit those traits and take advantage. On the other hand, millennials undervalue or even completely ignore life experience (aka, wisdom). They incorrectly believe that intelligence is wisdom, or that intelligence can overcome a lack of wisdom. That's far from true as people will learn the hard way. Wisdom and life experience is something that only comes with age, and is why you always hear the phrase "respect your elders". You're being asked to respect wisdom itself.
Let me ask HN a question; when you were 20, did you think you were smarter/wiser than when you were 10? How about when you were 25? Did you think you were wiser than your 15 year-old self? Those of us that hit or broke 30 think we are miles and miles smarter/wiser than our 20 year old selves in exactly the same way we were smarter/wiser than our 10 year old selves when we were 20. That increase in wisdom/life experience does not stop when you hit some magic age. Sure, you may stop growing maturity wise, but you never stop learning. At least I haven't yet, and I'm approaching 40. I look back at my 30 year old self and laugh because I was a complete moron who thought he was starting to finally figure some things out. Nope. Not even close. Still not close yet but I finally understand that you will never have anything figured out.
Millennials take that life experience for granted because they don't have enough yet to even know what it is.
I am shocked to learn that someone who has a large number shares in unlisted tech companies is keen on others investing in these stocks.
More seriously nobody really knows what is a good investment these days. Years of zero or negative interest rates have broken the old models and nobody knows what is to come.
This is why all the smart MBA kids who wanted to get rich quick don't go to wall street anymore. They go to silicon valley instead. Which is where we get bro-grammers, and an emerging culture in tech that doesn't understand or care about historical values like open source. When all the shallow people move to tech, tech gets shallow.
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[ 0.18 ms ] story [ 40.6 ms ] threadThe thing I don't quite know is how the tech culture is going to generate a replacement to Johnson&Johnson in the next 20 years.
Unilever bought dollar shave club, right? So that's good for investors. But if all the big companies buy the successful unicorns.... didn't the big companies win? A win/win, sure, but not the "GE is finished" sort of opening.
I think that a core argument here is that SV can come in and eat these conglomerate's lunches in certain verticals. But that's fine! So many of these companies are in so many domains that having one division go to zero is something that's happened at the beginning of time, right?
So there's an argument that going against these huge companies is a Good Idea(TM). But the success of the SV company does not mean the collapse of GE/J&J/Coca-Cola. Not to mention Wal-Mart.
Amazon is a good counter-example to what I'm saying, as it has taken significant market share from so many different industries. I wonder if SV really has the guts to make "real" capital investments like with Amazon again.
Space X happened because a billionaire just through all his money in, but the "traditional" financing companies (banks) are making those kinds of big bets all the time! I think we're still a ways off from capital-intensive startups ("real money") from getting those. Especially with the 20+ year lead time necessary.
I kinda see the argument for oil going to zero, but transportation is only 1/3rd of oil expenditure. I think Exxon-Mobil will still sell stuff for a while.
This is the wrong assumption. The winners in this scenario are the investors who invested early in DSC and exited on purchase.
Lather, rinse, repeat.
Additionally, on the tech/start-up side too, there were many shorter-lived companies that never lived up to the hype or declined from a position of unrivaled greatness (Cray?).
If there is a fatal error in the OP, it is in the certainty and needless cocksureness of McClure's predictions.
Given the huge sizes of these markets and the value of products and commodities, it is laughable to predict an imminent decline in companies that do pharmas, chemicals, industrials, medical devices, etc. based on metrics cherrypicked to create such a narrative (e.g. shift in highest-revenue companies).
Assuming they just sit still, sure. But large companies aren't uniformly run by Hollywood stereotypes.
More importantly: Large companies don't need to be better than startups to crush them. They have the depth of finance to sustain a brutal fight.
They only have to be good enough to hold the line. Attrition will do the rest.
Add to which, a lot of F1000 companies have decided that disrupting their existing F1000 competitors seems like a jolly good wheeze and have been studying up on this hunky-funky agile and lean thing.
Disclosure: I work for Pivotal and in Pivotal Labs, we've seen a massive surge in interest from F500s who want to learn to dance. Some of them are quick studies, too.
This is also the first year that I've regularly had senior executives and C-suites (as opposed to tech) ask me about agile as a qualifying or competitive factor. I'm always nervous when process becomes a qualifier (due to the "best practices are no magic bullet" expectations management it requires, often in the face of the competition's unwarranted claims), but I'm happy to see plenty of F100+s thinking about how to effectively innovate within their core markets without throwing $20m waterfalls at the problem.
Now we work with a lot of enterprises, most of whom by employee headcount outnumber us by 10-100x : 1. We can't boil the ocean. We have to do it a piece at a time.
Often the C-suite are converted after just a few visits to our offices, or after talking to our various office directors (nearly all of whom have come from frontline engineering, product management or design). And typically the engineers, product managers and designers we work with are quick to see the benefits too.
But these companies are very large and sometimes the incentives are highly heterogenous across different individuals and departments. But slowly, surely, they change. And even when they don't completely change, it only takes an isolated pocket of fast movement to keep a large company in the game against disruptors.
That said, we've found that after a while, the ideas and practices begin to spread by themselves. A good example is The Home Depot, with whom we've had several Labs engagements now. Cody, from THD, even gave a tech talk about our NYC office about the experience: http://original.livestream.com/pivotallabs/video?clipId=pla_...
Unfortunately, we flubbed the audio, so Cody is a little hard to hear, but if you can hear -- it's a great story.
I know a handful of F500 execs, and they are formidable. Sure, they may turn to IT to set up their new "iPhone BlackBerry", but they have tools in their belt to compete with that most valley entrepreneurs don't even know exist.
They were the best, brightest and hardest-working of the previous generation. They are us, with more life experience and better networks. Underestimate them at your own peril. They might be dinosaurs, but who wants to jump in the ring with a velociraptor?
Let me offer the analogy of a big, old software project. It is far more difficult to make a major refactor of some 20-year-old, millions-of-lines system than a script you wrote yesterday. That's not saying the old project was incompetent. It could have been very elegant, the best engineering of its day.
For example, suppose you're at a large enterprise that has a silly expense policy involving taping physical receipts to a standard size paper, one receipt per page, then mailing the packet to India, where the pages get scanned and sent to the accounting department, which meticulously compares the receipts against the Excel spreadsheet you filled out and submitted via VBA macros (yes, this is a true story). How easy would that be to change? Compare that experience with working at a 20-person company and asking the accountant if she doesn't mind using Expensify.
Saying that a big company is hard to change isn't necessarily an accusation that the CEO is myopic.
As for what McClure meant by saying public companies will be disrupted... I'm not really sure, since he also contradicted himself saying that they'll purchase their potential disruptors. Perhaps he meant that large enterprises which do not acquire new companies will be out-competed by those who do. That's somewhat of an interesting assertion, but I don't know of any large enterprise that has only an M&A team or an R&D team. They all have both.
In that case I'm sticking to my guns and just disagreeing with you. Many companies are horribly operationally inefficient in many ways, but they often don't care if it's not actively costing them significant market share. The moment that expense report process starts impacting the bottom line you can bet they'll be on the cutting edge of resolving it.
My experience suggests otherwise. Big organizations are bureaucracies carved up into little fiefdoms, each little lord trying to maximize something different. The boss of the receipt scanners wants to increase headcount, not reduce costs. As a management consultant, I encountered that situation time and again -- an executive choosing an outcome worse for the company, knowing it'd be better for him or herself, or simply out of pride, laziness, or malice. There's a reason why Dilbert rings true for so many office workers.
A new CEO can try to clean things up, but they can't fire all the middle management simultaneously, so the ship turns very slowly. Going back to the software metaphor, it's not the issue of short-term vs long-term thinking on patch vs refactor, but the problem that the system is live and must be highly available during maintenance.
Firing all middle management doesn't help: humans are self-interested. What a CEO needs to do is align incentives for middle management with the interests of the firm, so that self-interested middle managers aren't microoptimizing their domains on criteria that don't serve the interests of the company.
That's a good buzzphrase, but I've never seen anyone do it in earnest. I was once on a consulting project to help a "Director" pick appropriate KPIs as part of a company-wide effort to improve departmental performance measurement. They rejected my suggestions to measure their effect on profit. My manager, to rescue the project, told me to ask what they wanted to be measured on, write it down, and hand it back as the report. The Director loved that idea and rattled off a list of metrics that could be easily sandbagged and had no clear relationship with company profit. ... And yes, that company is very large and well-respected.
Only a handful of formidable execs are not stuck in a bygone age, but are still scowling at these tech millennials pulling in millions of revenue because they used unorthodox business methods.
The previous generation needs to catch up. Adapt or begin dying at your own peril.
Let me ask HN a question; when you were 20, did you think you were smarter/wiser than when you were 10? How about when you were 25? Did you think you were wiser than your 15 year-old self? Those of us that hit or broke 30 think we are miles and miles smarter/wiser than our 20 year old selves in exactly the same way we were smarter/wiser than our 10 year old selves when we were 20. That increase in wisdom/life experience does not stop when you hit some magic age. Sure, you may stop growing maturity wise, but you never stop learning. At least I haven't yet, and I'm approaching 40. I look back at my 30 year old self and laugh because I was a complete moron who thought he was starting to finally figure some things out. Nope. Not even close. Still not close yet but I finally understand that you will never have anything figured out.
Millennials take that life experience for granted because they don't have enough yet to even know what it is.
More seriously nobody really knows what is a good investment these days. Years of zero or negative interest rates have broken the old models and nobody knows what is to come.