A recent issue of Wired magazine (a favorite at the I Open Lab) was dedicated to the New New Economy and on the cover they spell out the laws for success in this “New Squared” economy, including more start ups, fewer giants, and infinite opportunity. While this is certainly on trend with popular thinking, and nicely plugs the Editor-in-Chief’s book (The Long Tail by Chris Anderson), it ironically takes a narrow view of the industry it uses as a key example, the American auto industry.
The fall from grace of the big three auto makers is a shot in the gut for the American economy and has led to pontifications about the poor decisions made for decades and the dangers of becoming to big for your own good. While dismantling the big three’s performance issues, the article makes several references to the growing dominance of Japanese rivals, timing issues like introducing hybrids priced $10,000 to $20,000 more than the competition, and a pervasive NIH (Not Invented Here) mentality. These are all good points, but they don’t stem from the big three just being, well, too big.
Surely being successful can’t be the cause of ultimately being unsuccessful. Wired calls large companies like Wal-Mart, AT&T, and the big three “dinosaurs,” who are finally marching into the tar pits. The issue with these companies isn’t size though. Afterall, a lot of small dinosaurs went extinct too. The issue is a mindset that resulted in a corporate trouncing by smarter, braver, and yes, even bigger competitors. While praising the performance of Toyota and Honda, Wired fails to acknowledge that these companies are HUGE themselves. If being so big is the cause of failure and the age of giants is over, why are Toyota and Honda doing so well? For that matter, Google, Microsoft, Apple, and others? Sure, we’re all in a larger playing field with more players, but the biggest players are still winning.
An opportunity that automakers in the US missed is tapping into their own long tail, to borrow the term from Wired. With being a large company comes having large workforces and the bigger the workforce, the better the brain power. A firm with 3000 employees can almost always come up with bigger and better ideas than a firm with 3 employees. In this age of open sourcing and a belief in the power of crowds, it would behoove the big three, and any other “dinosaur,” to tap into their own long tail to develop new products, ways of doing business, and making breakthroughs happen.
While unfortunately a lot of these big companies made decisions that ultimately led to their demise, we’re sticking with the theory that when it comes to business, bigger is better.