It seems that every high-tech company that has ridden a wave of innovation to industry leadership eventually faces a cliff that leads to doom and gloom.
History is riddled with tech companies whose names were once synonymous with innovation. These firms drove the industry into uncharted areas, companies like RCA, IBM, Texas Instruments, Motorola, and Nokia. While many of these companies still exist, they are nowhere close to their former glory.
And, this cycle seems to have no end. Just as one company rises to dominance, another comes behind it to challenge that dominance. As an example, not a day goes by without someone questioning the future of Apple, a company that has shaped the industry as we know it. So, if this trend is so predictable, why can't anyone manage to break the cycle?
After more than 25 years in the industry, working with and for many of the companies mentioned in this article, I've come to realize that the answer has more to do with the life cycle of a company than its ability to innovate. As companies ride that wave of innovation, they grow and expand. Since these companies rose on the heels of innovation, they continue to focus on innovation. This all bodes well for a technology company looking to grow and to drive the technology industry. Unfortunately, their increasing size and dominance eventually works against them.
As companies grow, they tend to become less nimble to market changes, and rightfully so. If your company has spent years and millions or even billions of dollars developing a technology, you are unlikely to abandon it at the first sign of trouble. You are going to continue to invest and do your best to use your industry relationships and influence to push the industry in the desired direction.
This leads to the first problem -- arrogance. The market leaders eventually believe that they can drive the industry the direction they want it to go, especially if they throw billions of dollars at it. While this strategy may work during the initial stages of change, it eventually faces diminishing success. IBM, Microsoft, and Intel have all tried to reroute the PC industry at one time or another to no avail.
This growing company size and market dominance also leads to the second issue -- protectionism. As companies reach that dominant position and have less market growth potential, they naturally look to maintain that market position through the implementation of proprietary technologies or heavy-handed enforcement of patents. They always justify it as just reward for their investment. But it does more to subvert innovation and competition, ultimately driving the industry to look for other solutions. The technology industry thrives on enablers and fights restrictions.
Despite these factors, there is one factor that inevitably escapes the grasp of every technology leader: missing a major market transition. Motorola, one of my former employers, is a great case in point. Motorola was a leader in developing new markets and technologies for close to 100 years. Yet, the company failed to maintain a leadership position in any of those markets.
Being an engineering company, it always focused on the technology and not on the changing dynamics of the market. In the end, the company always delivered great technology, but that didn't always translate to market success. Smaller, more nimble companies would come in behind it and take the market in a different direction.
Unfortunately, every high-tech market leader eventually finds itself in this position. The signs are visible even for the market leaders today. Google missed the social networking trend, Microsoft missed the Internet surge, Intel missed the mobile revolution, and Apple is being challenged by open-source solutions.
This is not to say that the future is all doom and gloom for technology leaders. The successful ones still find new areas to expand and lead. Often, this requires companies to scale back and focus on either existing segments or new segments where the company can establish a leadership position. However, they seldom are the true industry innovators or market leaders that they once were. The next generation of technology leaders will be those that enable the industry, much like those that came before them.
— Jim McGregor is the founder and principal analyst of IRIAS Research.