There’s a good piece by James Surowiecki called The Pipeline Problem in this week’s New Yorker. It talks about the difficulty that big companies have doing real innovation, in this case the pharmaceutical giants like Merck and Pfizer. Explored in the article are some similar causes detailed in The Innovator’s Dilemma about inertia and risk aversion. There is an understandable rationale for big companies being slow to enter new markets. For entirely new markets they are hard to measure well a priori and therefore make it difficult to form a detailed business case for entering. And growing markets are typically smaller than those that big companies play in, which helps to explain their fashionably late arrival. Surowiecki doesn’t seem to think this is necessarily bad, but perhaps they should focus less on innovation (which they don’t do as well) and instead focus on their strengths in marketing and distribution more like the movie business.
Related to market size, I liked the advice in Sink’s latest column, “Getting Started with Your Own Software Company”, that for small ISVs it is important to make sure the market you’re entering isn’t too big (which he caps at $50m).