I studied the theory of Disruption with professor Christensen.
I will be brief in my opinion about new market disruptors or new market innovation. Those that do have the ability to see the new market disruptors and invest in them are the ones that will feel the laurels of their investment not only early on but in long term also.
New market creators are companies that see the job to be done and create either the product or the service to fulfill this job.
So, for me it’s not a matter of difficulty to invest in a new market disruptor or a new market innovator its just a matter of perspective and ability to see and gauge the market and what jobs are out there that need to be done.
Venture capital at large are companies that try invest in small but potentially large investment opportunities. That necessarily is something that will give the ability to the company itself to grow through the capital invested.
There is a large list of companies that are still in existence and have grown to major firms just because venture capital exists and invests in companies like these. Many Silicon Valley companies and others have started as back yard companies with two people and have grown to multi million companies employing large amounts of employees just because they were picked up and agreed to be invested from venture capital firms.
So, in wrapping up I would state that Venture capital firms do play a role in creating MCIs but we need a lot more than that.
A CEO is focusing on future developments when right now is building his balance sheet and transforming into a fortress. The well known mantra of Jamie Dimon the fortress balance sheet.
Only then a company is set to face either potential investment opportunities that might arise or a potential crisis that hides itself near the corner, which it might eventually turn itself for a company with a fortress balance sheet to a potential investment opportunity.
Only by preparing yourself today for what future holds I believe, as a CEO you focus on the future and long term perspectives rather than short term developments.
Most publicly traded and major companies do have, at least to me a societal interest in creating jobs becasue that would mean that the company itself is growing and there are jobs to be done that need people to do it.
However, again as mentioned in my previous submission I believe that job creation if its a societal interest it has to be done over a period of time. Short term boosts of job creation do, at least to me, follow the economic cycles and don’t necessarily add to the stable long term job creation fueled by long term investment opportunities.
I believe that long term growth is more realized and a classic investment strategy. I don’t believe that short term investment opportunities add value, they simply enlarge your balance sheet and increase the numbers that make analysts happy.
In other view by investing in long term opportunities you realize more and earn more from every aspect plus you have the ability to gauge your investment as the time comes by. In a short term investment opportunity the room for maneuvering it is considerably less.
Earnings vs. long term growth.
I believe that most managers sometimes fall into the trap of growth in order to boost short term earnings and please out of fear their shareholders and the analysts alike. I believe a more conservative and thoughtful approach would be long term growth.
Very famously Jamie Dimon Chairman and CEO of JP Morgan Chase has stated that he hears all the time people saying about growth, where is the growth where is the growth, well sometimes you just can’t grow. Sometimes you just need to stay put and build your balance sheet in order to be able to materialize upon opportunities that may arise in the future or keep your balance sheet tight for crisis that are near the corner.
I am more of this view.
I am of the view that we definitely not have a growth problem.
However, we are stuck in a period where the new entry of alternative energy solutions from automotive to housing are creating growth potentials but the slow fading existence of oil keeps everything at bay.
I believe we need a major push forward something that will drastically push us in the need to create something new in various aspects of our economy.
Too much capital is created and stored, that means at least to me few investment opportunities are realized or even less are believed to be essential or investment friendly.
Moreover, I believe there are no hot opportunities available just because the already existing ones are probably boring or not convincing enough.
I would argue that Capital should be invested in investment opportunities where the decision to invest would be taken from lower tier employees on their respective departments. Their investment suggestions should be passed on to the board of directors in order to ratify the decision. Each department should be making their own investment decisions and simply wait for the approval of the board. I believe that top tier executives sometimes miss growth potentials just because they see the company top down. I believe a more bottom up approach might after all help with this situation.
After all our professor C.Christensen in Disruptive strategy course has so well put it. It is the disruptor either low end or new market that creates the incentive for major players to flee from competition or left out from the new market. I am of the view that growth potentials have to be realized from the low end employees – disruptors.