Businesses understand the power of digital innovations to reshape industries and markets. Yet, time and again, they have struggled to innovate with new and disruptive technologies.
When Companies Want to Innovate, But Investors Won’t Let Them
The innovator’s dilemma is not only caused by customers.
August 21, 2018
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Summary.
When investors value firms for their growth potential rather than current profits – as is the case with startups and tech giants – the companies are not only more likely to invest in digital innovation, but also obtain higher market valuations. In contrast, when investors expect current-period profits – such as from industry incumbents – they are not only less likely to invest in digital innovations, but obtain significantly lower market valuations when they try to become digital leaders. In other words, the market rewards “growth” companies for investment in digital technology, but actively punishes more mature, steadily profitable firms for the same.