New to Big

Just because a company is big doesn’t mean it’s safe from decline — innovation is its life raft in a sea of change.

1. Shareholder-first mentality crippled innovation

During the mid-20th century, American capitalism shifted its focus from serving consumers to prioritizing shareholders. This change, encouraged by economists Michael Jensen and William Meckling, led businesses to emphasize short-term gains over addressing customer needs. As stock prices became the yardstick of success, companies began cutting costs and minimizing investments in growth.

This obsession with shareholders acted like a weight, slowing businesses down. Companies once driven by forward-thinking innovation became stagnant. Like a bird neglecting its chicks to feed a demanding cuckoo, businesses abandoned core values in favor of quick profits.

The shift left a void in innovation. Former titans of industry, once quick to rise to customer demands, found themselves unable to adapt when challengers with better ideas appeared.

Examples

• Large corporations like Sears prioritized financials but failed to adapt to e-commerce, losing dominance to nimble competitors like Amazon.
• Kodak missed the shift to digital photography, staying wedded to traditional film to please investors.
• The U.S. auto industry neglected hybrid vehicles until foreign automakers demonstrated market demand.

2. Start-ups prioritize customer problems

Start-ups differ from traditional companies by focusing on solving real-world issues. Instead of refining existing processes, they dive into solving customers' frustrations, also known as “pain points.” This customer-focused approach fuels breakthrough ideas.

Take Facebook, for instance. Its origin story began with Mark Zuckerberg identifying a universal desire: the need for better connection with friends and family. Similarly, Deliveroo addressed the inconvenience of limited restaurant delivery options, giving birth to a booming food delivery service.

Start-ups also embrace a different pace. Traditional companies tend to tweak what's already working, while start-ups embrace risk, often creating entirely new markets rather than fighting over existing ones.

Examples

• Facebook’s early success was anchored in solving users' need for effortless online communication.
• Deliveroo transformed how people accessed restaurant food, targeting gaps in late-night delivery.
• Uber revolutionized how people think about urban transport by addressing the frustration of inefficient taxi systems.

3. Reinventing Microsoft under Satya Nadella

Microsoft stagnated under previous leadership before the 2014 appointment of CEO Satya Nadella. By adopting an entrepreneurial mindset, Nadella reinvigorated the 44-year-old company. His “customer love” philosophy shifted Microsoft from focusing solely on profits to emphasizing forward-thinking ideas and innovation.

Nadella fostered an internal culture where employees felt empowered to experiment. He prepared his teams to take risks, embrace bold ideas, and pursue long-term goals over quarterly profits. The results? Within a few years, Microsoft became one of the most dynamic companies in the world, boasting consistent profit growth.

This transformation didn’t just save Microsoft but demonstrated how even massive corporations can adopt a start-up-like approach without losing their identity.

Examples

• Microsoft Azure, their cloud computing platform, rapidly grew under Nadella’s leadership into a direct competitor to Amazon Web Services.
• Office 365 introduced subscription-based software, breaking away from one-time sales models.
• Nadella’s "growth mindset" philosophy encouraged the push into emerging AI technologies.

4. Addressing problems, not just markets

Traditional businesses often rely on Total Addressable Market (TAM) models that estimate profits based on a pre-existing market. While effective for incremental gains, this method limits creativity and discourages the chase for entirely new opportunities.

By contrast, the Total Addressable Problem (TAP) model urges businesses to uncover fresh, unmet customer needs. This approach fuels exponential growth by creating solutions for problems that pre-existing markets may overlook. It forces businesses to reframe their thinking.

The transition from early mobile phones — tools for executives only — to mass-market accessible devices highlights this viewpoint. Companies that addressed universal communication needs became dominant players.

Examples

• Early mobile phones addressed a niche market, but companies that embraced mass-market needs, like Nokia and Samsung, captured larger audiences.
• Airbnb pivoted from renting air mattresses to creating solutions for global travel accommodation.
• Tesla reframed the auto industry by focusing on sustainable transportation rather than traditional car buyers.

5. Understanding customers deeply matters

Traditional customer feedback methods often fall short because customers don't always know what they actually want. Instead of tweaking existing products based purely on verbal feedback, businesses need to observe real customer behavior.

For example, if customers express enthusiasm for a new app but won’t commit to using it, it’s a sign to pivot. The sugar-free candy scenario mentioned in the book highlights this—market research revealed “treating oneself” as the underlying appeal, steering the company to broader possibilities than candy.

By prioritizing raw customer behavior over surface-level feedback, companies can identify genuine opportunities for growth.

Examples

• Netflix shaped its streaming business based on viewing patterns, not verbal feedback.
• Steve Jobs famously ignored focus groups, relying on intuition to make the iPhone transformative.
• Procter & Gamble introduced Swiffer after observing how people clean their homes, solving a hidden “cleaning frustration.”

6. Failure is a stepping-stone

Innovation thrives on failure. However, traditional executives avoid mistakes, fearing reputational damage. This results in missed opportunities for growth. Successful ventures like WD-40 or Bubble Wrap existed because creators embraced productive missteps.

Small, cheap, fast failures offer lessons that pave the way for breakthroughs. By fostering a culture of risk-taking and eliminating the stigma surrounding failure, businesses unleash creativity and resilience.

Esther Dyson’s maxim — “Always make new mistakes!” — encapsulates this ethos, urging leaders to value lessons learned from missteps.

Examples

• WD-40’s success came after its creators failed to achieve the perfect formula 39 times.
• Bubble Wrap found its true purpose wrapping computer parts after failing as wallpaper.
• Post-it Notes emerged after scientists repurposed an adhesive that wasn’t sticky enough.

7. Seeking the right team for innovation

Traditional corporate cultures often suppress mavericks and contrarians, favoring rule-followers and incremental thinkers. For growth, companies need adaptable, curious, and bold team members who can thrive in ambiguous environments.

Such individuals challenge conventional wisdom and bring fresh perspectives to business strategies. The "mad scientist" archetype—relentless experimenters who push boundaries—serves as the best candidate for exploring uncharted territory.

Building diverse teams that prioritize collaboration over ego ensures fresh ideas take shape faster.

Examples

• Google's "20% time" policy encouraged staff to experiment, resulting in Gmail and Google Maps.
• Spotify’s cross-functional teams combine their varied expertise for smooth scaling.
• Pixar fosters trust within teams, prompting ideas to blossom even when they seem risky.

8. Smarter funding for growth ideas

For fresh ideas to succeed, they require consistent and adaptive funding. Traditional annual budgets often slow innovation because they make it difficult to seize spontaneous opportunities. A flexible Growth Board model ensures that funding flows to ideas with early promise while cutting off failing ones.

Investing in many projects at once mirrors venture capital portfolios. Though most ideas won’t succeed, investing broadly improves chances of finding a game-changer.

This model embraces calculated risk while ensuring businesses don’t overcommit to any single idea prematurely.

Examples

• Apple’s robust R&D spending led to standout products like the Apple Watch.
• Amazon uses tanked projects like the Fire Phone as learning tools for big successes like Alexa.
• Google's parent company Alphabet balances moonshot projects (like Waymo) alongside profitable ventures.

9. Staying dynamic over time

The world shifts quickly. Even successful companies like Microsoft need to maintain urgency to keep growing. Adopting an always-on mindset ensures companies remain competitive and alert to changes.

By treating every day like a restart, businesses avoid complacency and thrive even amidst disruption. Regular shifts in strategy encourage consistent reinvention and sustainable growth.

This philosophy rewards flexibility, ensuring long-term relevance in ever-changing markets.

Examples

• Disney continually updates its parks and creates new franchises to attract visitors.
• Amazon reinvents its supply chains to maintain its dominance as consumer behaviors shift.
• Tesla updates vehicle software regularly, making even older cars feel new.

Takeaways

1. Embrace failures as learning steps; ensure your workplace encourages small, quick risks to drive creativity.
2. Observe your customers closely—never settle for what they say they want; dig into their habits instead.
3. Build diverse teams filled with curious and adaptable people who challenge assumptions.