New to Big | David S. Kidder

Summary of: New to Big: How Established Businesses Can Grow Like Startups
By: David S. Kidder

Introduction

Welcome to the captivating world of ‘New to Big’ by David S. Kidder, a book that explores how established businesses can adopt the mindset and strategies of successful start-ups. This summary delves into the transformative journey of long-standing companies, highlighting the importance of continuous innovation and bold risk-taking. As you read on, you’ll uncover the key principles of the ‘New to Big’ philosophy, learn how businesses can shift their focus from a Total Addressable Market (TAM) to the Total Addressable Problem (TAP) model, and understand the true potential of fostering a culture that values customer-oriented solutions and celebrates productive failure.

The Rise of Shareholder Capitalism

In the late 19th century, American businesses were civic-minded and focused on serving customers. However, by the 1960s, mega-corporations prioritized accumulating profits and paying executives over fixing customer problems. In response, economists Michael C. Jensen and William H. Meckling published a paper encouraging corporations to prioritize shareholders above all else. This resulted in businesses becoming completely detached from public or consumer needs and obsessed with cutting expenditures to boost stock prices. As a result, they stopped innovating and stopped growing, leading to the rise of shareholder capitalism.

Start-Up Mindset for Sustainable Growth

Established businesses tend to become stagnant and face decline due to their focus on shareholder returns. Start-ups, on the other hand, seek to identify pain points for consumers and provide innovative solutions for long-term growth. Facebook is an example of identifying the need to keep in contact with family and friends, while Deliveroo was founded to provide more delivery options for restaurant cuisine. Start-ups embrace risk and face the future for continuous growth. The top five companies according to market capitalization in 2018, including Apple, Amazon, Alphabet, Microsoft, and Facebook, have all adopted this start-up mentality. This concept is what the author calls the “New to Big” philosophy that promotes taking an idea with potential and growing it exponentially.

Revitalizing an Industry Giant

How Satya Nadella’s Vision Refounded Microsoft

Microsoft was one of the top five companies in terms of market capitalization in 2001, but by 2018, it dropped out of the list. This was due to a lack of innovation and growth after Bill Gates stepped down, and Steve Ballmer followed an uninspired and incremental approach.

However, things changed when Satya Nadella was appointed CEO in 2014. Nadella approached his role with a fresh mindset, focusing on the leading indicators of success, such as customer love, instead of lagging indicators such as revenue and profit. He encouraged bold new ideas, experiments, and a long-term vision, shaping Microsoft into a hybrid of entrepreneurship and corporate resources.

Nadella’s tactics paid off, with a double-digit profit margin growth every quarter. He refounded Microsoft, revitalizing the once-stagnant company and proving that innovation is necessary for the survival of established organizations. We can all learn from Microsoft’s story that agility and adaptation are vital for success.

Revolutionizing Business Models

The book challenges the traditional Total Addressable Market (TAM) model of established businesses. While TAM is limited to existing customer needs, the Total Addressable Problem (TAP) model focuses on discovering new customer problems and needs, leading to exponential growth. Businesses using TAM tend to prioritize short-term financial success, causing stagnation and obsolescence. In contrast, TAP uncovers untapped markets that yield enormous returns, as exemplified by the success story of the mobile phone.

Anticipating Customer Desires

To succeed in the TAP model, companies need to anticipate what customers want by looking at their behavior rather than their words. By taking a voice-of-the-customer approach, businesses can determine whether their ideas have commercial viability. They should be ready to pivot their ideas and be flexible observers. Companies should identify the customers’ feeling towards their product rather than merely focusing on the product itself. For example, a company producing chewable candy can switch to producing other treats like makeup or houseplants if the original product idea doesn’t align with customer desires. The lesson is to have a growth mindset and approach business with flexibility and adaptability.

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