Why have companies like Google, LinkedIn and Amazon been more successful on the stock market and have more stable revenues than BlackBerry, Apple, Nokia and Microsoft in recent years?
It seems that the type of innovation they have used has changed over the years.
Product and service innovation is more important in the knowledge-based economy than in more traditional sectors.
Although it remains a matter of survival for many companies, it has not been of the same scope, over the years, for all the companies mentioned above.
The type and style of innovation are the main elements and determinants of a company's success and retention. This is also true in many sectors that are classified as traditional.
The French researcher Benoit Sarazin identified two types of innovation These are incremental innovation, which is improving existing products, and breakthrough innovation, which is a conceptual change for customers: "In general, [it] provides customers with radically higher benefits at radically lower cost," according to Sarazin.
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Cirque du Soleil has revolutionized the world of circus through its ability to breakthrough innovation.
BlackBerry, Nokia, Apple and Microsoft have also used it for many years as they have revolutionized processes, leading them to become leaders in their industry.
This is often what happens: success pushes companies to be satisfied with their innovation, and this is where incremental innovation takes over, followed by stagnation and gradual decline.
In the case of Apple, the death of Steve Jobs has left a huge creative and forward-thinking void, and the firm is struggling to surprise consumers again, which is why financial results have disappointed investors for the past year.
Similarly, Microsoft's business model has been surpassed, in annual growth, by Google's business model.
Management style plays a major role in whether or not a company remains in a state of disruption. The firm's fundamental benchmarks and the founders' philosophy of innovation undeniably influence its future.
Indeed, Jeff Bezos, the founder of Amazon, is still at the head of the firm and continues to pursue his philosophy of innovation. The founders of LinkedIn and Google are still the leaders of their firms. Guy Laliberté is still the main shareholder of Cirque du Soleil, and the company continues to grow.
For the evolution of the revenues and prices of these two types of businesses, see the following table:
* Ttable compiled by William-André Nadeau, Financial Columnist - November 12, 2013
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