3 lessons entrepreneurs can learn from the rise and fall of the biggest companies in history

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Only recently, right before the pandemic, did it seem like the big companies were on the upswing. A few “super” companies have dominated the software industries and their tentacles have reached multiple sectors. Much of the economy, market share centered performance gap Between large and small businesses is widening and people are forming fewer new businesses. Article in Harvard Business Review mentioned Fears that “lack of competition was suffocating the American economy”.

Many of those fears are starting to fade. We are viewing a file A historic boom in creating new businesses and a Reduce the performance gap between large and small companies. epidemic with itsBig resignation” And “Calm calm“was just a catalyst, accelerating the inevitable change – inevitable because that’s the nature of large organizations. They can’t maintain dominance for long, and in fact profitability and longevity Many of the big companies have been shrinking for decades. Supercompanies, now reeling from falling stock prices, are laying off thousands of talented employees, making room for smaller companies that Recruitment continues.

While this is a startling change of events, it follows a cycle that has existed since the beginnings of capitalism. Looking back at past cycles of creative destruction, in which large firms rose to fall to smaller competitors, entrepreneurs can find many lessons that can be applied today.

Related: How looking back at history can make you a better entrepreneur and leader

Lesson one: Take advantage of complacency

The first lesson is that large companies tend to grow satisfied the more successful they become. This provides an opportunity for smaller companies that are hungrier and more ambitious.

For example, the East India Company, chartered in 1600 and arguably the world’s first large corporation, once operated not only ships and warehouses but manned armies of soldiers to enforce colonial exploitation. The company enjoyed a monopoly on imports of tea and other commodities, and its power was so great that Adam Smith appropriated a large part of wealth of nations to criticize its weight. However, the company became a victim of its own success, and eventually declined as its leaders enriched themselves, got involved in politics, and stopped innovating.

The same lesson applies today. Once big companies think they are in trouble, they relax and start enjoying their situation. This is the perfect time to enter the market with an innovation or a new way of thinking.

Lesson 2: Strong connections aren’t everything

The second lesson is that entrepreneurs can still beat big corporations even if they lack the same ties to power. History shows that “right” can often defeat “might.”

Consider the example of the wealthy Robert Livingston, who financed Robert Fulton’s successful invention of the steamboat in 1807. Livingston used his connections and wealth to gain a monopoly on the ferry trade between New York City and New Jersey. But the reckless Cornelius Vanderbilt, with no social standing or education, dared to challenge Livingston’s privilege and won a landmark Supreme Court case, Gibbons v. Ogden, nullifying the interstate monopoly pacts. Thanks to Vanderbilt’s relentless efforts for efficiency and cost-cutting—and the new country’s distaste for government-backed concessions, he gained capital to improve not just ferries but ocean-going ships and then railroads.

Vanderbilt has shown that companies that rely on personal relationships often become overconfident, believing that they are protected from competition. This makes them vulnerable to smaller competitors who want to talk about their unfair practices.

Lesson 3: Great companies prefer stability over innovation

By the end of the 19th century, steel had become central to the economy, and Andrew Carnegie owned the largest and best factories. Like Vanderbilt, it expanded rapidly by keeping costs low and reinvesting profits. The remaining steelmakers were so worried about his moves in their markets that they pressured JP Morgan to buy him out for an incredible $480 million at the time.

After Morgan did so, creating US Steel, he failed to maintain Carnegie’s aggressiveness, allowing smaller competitors to expand. Fearing antitrust and favoring stability and profits over risky growth, US Steel failed to innovate and eventually collapsed with foreign competition and the rise of small steel mills in the 1960s.

US Steel’s preoccupation with stability is common among large companies, and it’s an opportunity for smaller competitors to move up. Consider many traditional retailers who failed to invest in e-commerce until it was too late. They assumed they were safe because of their size, but their failure to innovate eventually caused their downfall.

Cooperat is critical to building and maintaining a competitive advantage – and doing so becomes more difficult as companies succeed and grow. Entrepreneurs, like gangsters, often find opportunities to attack even against the most powerful corporate gorillas.

Related: 6 Ways Small Businesses Can Win Over Big Businesses

We need big and little

The history of creative destruction shows us that the current troubles of big tech companies like Meta are nothing new. Large companies tend to fall prey to a mixture of arrogance and complacency aspiring entrepreneurs Continue to look for opportunities to take advantage of emerging technologies and market trends.

Energetic commitment and talent will prevail over resource-rich competitors, as long as entrepreneurs choose their battles wisely. There are two reliable ways to spot opportunities to do this.

First, as companies get bigger, well-managed companies must leave opportunities on the table — market segments or product opportunities that are too small or different for them to do well or focus on. These often provide windows of opportunity for younger players. The small markets of today can become the big markets of tomorrow.

Second, new technologies and platform shifts inevitably create openings for more agile companies, whether in niche areas such as digital marketing or in transformative areas such as blockchain. The big companies are almost never moving fast enough.

Finally, when evaluating today’s large companies, it is important to remember that their success has usually come from basic entrepreneurial achievement combined with an organizational mindset. As entrepreneurs grow their business, they must become aware of the competencies they have developed and remain intent on building new competencies over time. New efficiencies fueled by innovation are likely to increase their trajectory in growth and value.

The modern economy still needs large firms, which are needed to produce goods and services on a large scale at affordable prices. this Where they excel. But we also need entrepreneurs to challenge them wherever they are – and ultimately, replace them as the new giants to drive the economy forward.

For pundits and other office-based observers, capers may seem inevitable. But old age inevitably spoils. The vitality lies not in the supposedly ‘professional’ management but in the struggling entrepreneurs.

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