Three Stages of Company Development
It is my thinking that the company development has three state/stage for each industry from its birth to its maturity. The first state is innovation. The second state is quality. The third state is Capital.
In the innovation state, the company's competitive strength is mainly derived from its abilities to innovate in new products. Some Internet companies in the early state of the Internet were AOL (now part of Time Warners), Prodigy (a failed joint venture between IBM and Sears), Netscape (failed due to competitions from Microsoft). These companies were very strong companies when then entered the market. Its main strength were their innovative advantages. However, the initial advantages can become moderated overtime and can be replaced by the second genration companies came with strong product qualities.
In the quality state, the first mover advantages are no longer critical. Microsoft is one great example. When Microsoft came out with Windows operating system, it was not as good as Apple operating system. When Microsft came out with Word, it was not as good as Wordperfect. When Microsoft introduced Excel, it was not as good as Lotus 1-2-3. However, Microsoft wins out in each of the products mentioned here due to Microsoft's continued product quality improvements over time. Another example is Google. When Google came out to the market, there were strong companies such as Yahoo!, AOL, MSN already in the search engine business. However, Google's search quality is so much better than the rest of the competitions. So Google now becomes the most dominant Internet company.
In the Capital state, innovation or quality is no longer the most critical factors. Capital management is becoming the most critical factor in company's competitiveness. Not many companies can reach this level. If any companies can reach this level of sophistication, it will become the most successful companies of the world. Many financial companies are in this category. Some other successful non-financial companies like General Electric, Toyota Motors, Sony Corporation are good examples.
Successful companies in the innvation stage can be due to one man's vision and ability. Sucessful in the quality stage should be attributed to great strategies. Successful in the capital stage is purely due to management.
In the innovation state, the company's competitive strength is mainly derived from its abilities to innovate in new products. Some Internet companies in the early state of the Internet were AOL (now part of Time Warners), Prodigy (a failed joint venture between IBM and Sears), Netscape (failed due to competitions from Microsoft). These companies were very strong companies when then entered the market. Its main strength were their innovative advantages. However, the initial advantages can become moderated overtime and can be replaced by the second genration companies came with strong product qualities.
In the quality state, the first mover advantages are no longer critical. Microsoft is one great example. When Microsoft came out with Windows operating system, it was not as good as Apple operating system. When Microsft came out with Word, it was not as good as Wordperfect. When Microsoft introduced Excel, it was not as good as Lotus 1-2-3. However, Microsoft wins out in each of the products mentioned here due to Microsoft's continued product quality improvements over time. Another example is Google. When Google came out to the market, there were strong companies such as Yahoo!, AOL, MSN already in the search engine business. However, Google's search quality is so much better than the rest of the competitions. So Google now becomes the most dominant Internet company.
In the Capital state, innovation or quality is no longer the most critical factors. Capital management is becoming the most critical factor in company's competitiveness. Not many companies can reach this level. If any companies can reach this level of sophistication, it will become the most successful companies of the world. Many financial companies are in this category. Some other successful non-financial companies like General Electric, Toyota Motors, Sony Corporation are good examples.
Successful companies in the innvation stage can be due to one man's vision and ability. Sucessful in the quality stage should be attributed to great strategies. Successful in the capital stage is purely due to management.
posted by Unknown at 7:16 AM
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