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The Entrepreneurial Business

I

“Big businesses don’t innovate,” says the conventional wisdom. This
sounds plausible enough. True, the new, major innovations of this
century did not come out of the old, large businesses of their time.
The railroads did not spawn the automobile or the truck; they did not
even try. And though the automobile companies did try (Ford and
General Motors both pioneered in aviation and aerospace), all of
today’s large aircraft and aviation companies have evolved out of sep-
arate new ventures. Similarly, today’s giants of the pharmaceutical
industry are, in the main, companies that were small or nonexistent
fIfty years ago when the first modern drugs were developed. Every
one of the giants of the electrical industry—General Electric,
Westinghouse, and RCA in the United States; Siemens and Philips on
the Continent; Toshiba in Japan—rushed into computers in the 1950s.
Not one was successful. The field is dominated by IBM, a company
that was barely middle-sized and most definitely not high-tech forty
years ago.
And yet the all but universal belief that large businesses do not and
cannot innovate is not even a half-truth; rather, it is a misunderstanding.
In the first place, there are plenty of exceptions, plenty of large
companies that have done well as entrepreneurs and innovators. In the
United States, there is Johnson & Johnson in hygiene and health care,
and 3M in highly engineered products for both industrial and con-
sumer markets. Citibank, America’s and the world’s largest non-
governmental financial institution, well over a century old, has been
a major innovator in many areas of banking and finance. In Germany,
Hoechst—one of the world’s largest chemical companies, and more
than 125 years old by now—has become a successful innovator in the
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