The role of violents in the economy and the innovation process
Large organizations are constantly criticized for conservatism, bureaucratization, wastefulness, and unmanageability. At the same time, with all their shortcomings, they are the core of any modern developed economy. Of the total number of US firms, Western Europe In Japan, they make up no more than 1–2%, but they also create from 1/3 to 1/2 of the gross national product (GNP) and produce more than half of all industrial output.
Along with weaknesses, violents undoubtedly have many advantages.
The area of scientific and technical activity of violents, as well as state-owned companies, is predictable, current, program-targeted scientific and technological progress (risky breakthroughs into the unknown - the chance of experimenters). Basically, violents take part in carrying out planned search and applied research (sometimes fundamental, especially in the pharmaceutical industry), in the creation of new models and modernization (improvement) of previously produced equipment. These are innovative product strategies.
For large companies it is vital important has constant cost reduction. An innovative solution to this problem is to switch to new resource-saving technologies that they create themselves or, more often, adopt from developers and early innovators.
Violents do not refuse to join the production of new products at the stage of maturation of their mass market.
New large firms most often appear in new industries or sub-industries, and on an international scale - in new, dynamically developing countries. Creating a violent requires large-scale investment. This is exactly how many large organizations appeared in a number of industries a century ago, violents were formed in industrial countries (for example, in Japan, South Korea), they also appeared in the newest industries (computer, biotechnology). To succeed in the market, a large corporation must make interrelated investments in three areas:
1) creation of large-scale production;
2) creation of a national and then international sales and marketing network;
3) creation of an effective management apparatus.
Russia is known in the world as a supplier of all kinds of new ideas and inventions. But it is also known for the fact that, due to a lack of timely investment, it very rarely takes these ideas to large-scale production. The first steam locomotive, which remained in the Urals, “dry” technology for cement production, continuous casting of steel, TV, radar, etc.
Violents acquire the features of “proud lions” - companies with a clear production profile and low diversification (does not penetrate into related industries and sub-sectors). At the same time, in the production of “their” mass goods, the “lions” are among the technological leaders. Features of their market positions: technical or organizational advantages in an important and promising market segment. Eg, Philips dominated the production of lamps, Toyota - compact cars, JV Khrunichev-Lockheed – launch vehicles for heavy commercial satellites.
The strength of the “lions” is their concentration on a narrow, but massive and promising range of goods; large expenditures on R&D and the creation of powerful research structures, which, as the core of the organization, do not disappear under any circumstances.
The “Proud Lion” launches a self-accelerating growth mechanism that is extremely beneficial for it. It begins with a massive invasion of the market with a new quality product By affordable prices. This happened, for example, with the program Windows corporations Microsoft, being the most common operating system for personal computers(PC). Soon the first millions of users appeared.
Further, it became profitable to write specific applications for an already well-known operating system, which thousands of programming firms immediately began to do. This became an additional argument for consumers in favor of purchasing the program Windows through which they gained access to a host of other programs compatible with it.
Sales volume increased, the number of users increased, costs per copy decreased, the price decreased, which again fueled the interest of programming firms, etc. With each round of self-accelerating growth, the “lion firm” breaks away further from its competitors. Dynamic “lions” are most aggressive in competition in the upper echelon of the “corporate pyramid”.
The growth potential of the market segment in which the “lion” was dynamically developing sooner or later dries up. The active evolution of the violent ends, and it moves into the position of a “mighty elephant”, when the violent company loses its dynamism, but in return gains increased stability. In this state it can exist for a number of decades. Stability is ensured mainly by three factors: large sizes; diversification; presence of a wide international network of branches.
The “mighty elephant” in conditions of stable existence is characterized by the effective tactics of the “clever second”. It is impossible to be the first to release new products all the time in the face of fierce competition. The first mover risk is high, and large production can't take risks.
Often “elephants” avoid being the first when a new product appears on the market, but they are nearby, in secondary roles.
Leading corporations begin to act only when the success of a new product is noticeable. Οʜᴎ pushes aside the innovating company and comes to the fore. The essence of the "clever second" tactic is that a firm does not have to be first to get the greatest benefit from an innovation. A discovery or invention is mainly of scientific and technical significance. It becomes commercially profitable only with mass replication and application in different fields, that is, with deep diffusion. This is where the advantages of the “violent - elephant” appear. Thanks to its widely diversified and mass production, it is the “elephant” that benefits most from the application of new products in a wide variety of areas.
"In history IBM success often did not provide technological innovations. Unfortunately, in too many cases we were second to implement them. But technology turned out to be less important than marketing and sales methods... We systematically sold more than those who had best technology, because they knew how to explain the matter to the client, how to help with the implementation of the machines and how to bind the client to themselves after the purchase. The secret of our approach to sales: “system knowledge”. (T. Watson Jr., Chapter IBM).
To implement this approach, the “violent-elephant” creates special structural units of strategic intelligence that monitor the promotion and commercialization of other people’s inventions, which ensures quick creation analogues, if possible superior to the original. The overall goal of the follow-the-leader method is to reduce risk innovation activity and reducing R&D costs by replacing free search with imitation of proven models.
The “lion” situation – the entire business is developing rapidly. The “elephant” situation – only some areas of activity are developing successfully, while others are lagging behind. Over time, the dynamism of the “elephant” decreases. His creative ability declines. The “mighty elephant” turns into a “sluggish hippopotamus.” While maintaining a gigantic turnover, the corporation gradually loses the ability to achieve commensurate profits, and even becomes unprofitable. Causes:
1) strategic mistakes associated with too broad diversification and the corresponding dispersion of forces;
2) the general decline of the industry, the death of capital, the lack of production prospects.
The situation in some cases can still be improved through a disinvestment strategy, that is, getting rid of unprofitable production and reducing costs in retained organizations.
Table 3
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