[bigbob]

Once a company goes public, it needs to continue to show growth to maintain it’s stock price, and it’s easier to grow by M&A than organically. Plus, the larger and more dominant a company becomes the more it’s investments and new product development resources are focused on existing customers and markets. This is “The Innovators Dilemma”, and creates opportunities for more innovative and agile new entrants to surpass them, and ultimately create new growth, which then makes these new companies lucrative acquisition targets. There are countless examples, but perhaps one everyone can relate to is Kodak, which was busy making it’s film business bigger and better while new entrants leapfrogged them with digital photography.

Big fish eat little fish if they want to survive.

[sparklite2]

Kodak, which was busy making it’s film business bigger and better while new entrants leapfrogged them with digital photograph

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Except Kodak wasn’t making its film business bigger and better. German and Japanese companies were making 35mm film, paper processor and film processors with superior engineering. And because Kodak’s R&D was so long, by the time printing equipment hit the shipping dock, it was obsolete. Kodak essentially gave away their crappy equipment to get/keep the photo-finisher’s business.

What’s ironic about Kodak losing the digital business is that they invented digital photography. But like the caterpillar who looked at a butterfly and said, “You’ll never get me up in one of those,” Kodak executives refused to pursue invest in digital development.