Why Great Businesses Fail

Why Great Businesses Fail?
What we're seeing in the last ten years
certainly are large companies failing.
Companies like Kodak, companies like
Blockbuster, companies like Sears.
And if you step back and think about it,
it's not obvious why that should be.
And when you ask people why that's so,
they typically say
they're being disrupted.
But disrupted by what?
Disruption really means the emergence
of a new set of competitors,
a different way of doing business,
a different technology that allows
you to do business in different ways.
But the interesting thing is that the pace of change,
the pace of disruption is actually increasing.
And in the face of that disruption,
those changes,
what we're seeing are big companies failing.
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What Do Big Companies Need To Do To Be Successful?
There are three very separate disciplines.
That they have to be good
at if they're going to be successful at dealing with disruption.
They have to have a process,
a discipline for developing new ideas,
what we call ideation.
They have to figure out which of those
ideas are likely to be successful as a business.
What we refer to as incubation（孵化） and then
the third discipline is that they have to
once they have an idea that looks
like it could be successful,
they have to have a set of processes
that ensure that, that new
business gets the assets and capabilities
they need to grow and here's the problem.
Some companies are pretty good at incubation.
They're perfectly willing to spend
money to come up with new ideas.
The problem comes when these
businesses begin to scale and
it takes serious resources.
When that happens, suddenly these
senior executives who are all in
favor of innovation suddenly realize
that to develop new businesses,
they may, in fact,
have to sacrifice some short-term profits.
That's when many CEOs suddenly
step back and say, maybe not.
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Which Companies Have Been Successful?
Let's focus just for a second on Amazon.
Amazon was founded in 1994.
In 25 years,
they have gone from 0 revenues to $230
billion with more than 600,000 employees.
They compete in businesses as
diverse as online shopping,
but they also produce TV shows.
They have Amazon web services, which is
the largest cloud provider in the US.
They run a variety of different businesses.
How have they done that?
They have done it by having very
careful processes for ideation, incubation and scaling.
They have a process which they
called a PR FAQ, F-A-Q process.
This is the process that encourages people
throughout the organization to come up with 

ideas for new businesses.
If the idea is deemed to have potential,
then they immediately move
into an incubation phase.
They form small teams.
These teams are responsible for
coming up with a minimal viable(可行的)
product to put in front of a customer.
If that idea turns out to
look potentially successful,
they immediately move into a scaling mode
where they provide resources for it.
They escalate（升级） it.
They get senior management attention.
One of the things Baso says is that most
companies don't really do experiments.
They don't take the big risks.
What Baso says, if you place big bets
just a couple of those big bets succeeding
will pay for all the small failures.
The nice thing about
companies like Amazon and
Walmart and some of these other
companies is that they do these things.
In very rapid pace,
that is they don't take forever to
decide whether a new idea is
potentially valuable or not.
The problem is that in big exploit organizations, 

the processes are typically
very measured very slow and
that oftentimes can kill innovation.
So when you do these things,
you need to do these processes rapidly.
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Why Is Leadership Important?
This is really a leadership issue.
When we look at companies that
have failed, have been disrupted,
it's not because of technology.
They fail,
because they didn't have leaders who
could play multiple games simultaneously(同时).
Almost all companies today are really
interested in innovation, 

but the thing that they often are not
sophisticated enough at is making this
distinction that we've been talking about
between ideation, incubation and scaling.
The best of these companies have
managers who understand that it takes
all three of these disciplines.
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