[kaon123]

This is similar to the point being made in "The Innovators Dilemma" [1].

I experience this currently at the wealth management bank I work. They were reluctant for a long time to invest into a mobile app for trading because it may cannibalise their current portfolio. They built it last year, but pricing was close to our bespoke services. The developers built a great product but when pricing is double whats on the market, then you are going nowhere.

The question "Will it cannibalise our current profits?" is asked to stop every idea. Rightfully so maybe: We make 750k revenue per employee. Money is bursting through the seams. Shame it all goes to shareholders, not employees.

[1] https://en.wikipedia.org/wiki/The_Innovator%27s_Dilemma

[TeMPOraL]

> The question "Will it cannibalise our current profits?" is asked to stop every idea.

I wonder if this is the real objection, or really just a proxy one? As in, yes, the new thing will compete directly with the old thing, but it will easily bring in way more than it "cannibalizes". So the company will likely come ahead. However, the old thing and new thing are likely developed by distinct teams, in different business units of the company. So I imagine this question is really a proxy for the old thing team asking, "will it cannibalize our currenet jobs?". If the answer is yes, it's not surprising they'll resist.

[NalNezumi]

I assumed it's also an easy trap to fall in to if you start to write down pros/cons in a list when you discuss / strategize where to invest your next effort to increase profit. Effort to optimize current thing, have a lot of pros and few cons, so very low risk. Something that could cannibalise current profit might have few bullet points at the pros list vs the cons, even if that one bullet point might be substantially bigger in the effect.

Sony had the technology(mp3 players, phone, etc) and competence to be the first one to invent the smartphone. But I can't imagine in a risk averse culture, that a boardroom would listen to someone that would come in a suggest something that cannibalise multiple divisions in the company, in the promise that it would generate more profit, vs each divisions proposal of how to optimize their already existing profits.

[netjiro]

It is an uncomfortable risk for many, to back a likely long term winner over a sure current cash cow. Even if their own estimates say they should go for it. See it all the time.

And to make it even more short sighted, the idea won't go away, it will just take a little longer and then pop up in competing colours.

[ZephyrBlu]

If you care about short-term profits it makes sense to ask that question, if you care about long-term profits it doesn't.

I think it's going to be very rare that over the life of a business every opportunity will be orthogonal to your existing business lines and not cannibalize them in some way.

Companies seem structurally incapable of cannibalizing existing business lines even if it barely impacts revenue because they cannot afford to report reduced growth for even a single quarter.

[Aunche]

The difference is that employees at startups get a larger share of the long-term profit. At a megacorp, you mainly win by getting promotions, and the easiest way to do so is to optimize for short-term profits.

[rco8786]

Yea it’s not about short or long term, it’s just about shareholders and risk management.

And honestly the system actually works pretty well. Incumbents do the thing that got them the incumbent spot, and new challengers try risky stuff to see what could beat them out. Market churn and competition fuel innovation. The cost is that incumbents occasionally get dethroned but that seems like a healthy thing overall.

[madsbuch]

This is really interesting!

My immediate thought is: "If we don't cannibalise their current portfolio, somebody else will" and use that as the argument to carry on on good ideas.

Why do you think that has not been the natural inclination?

[rco8786]

Because very few companies want to take that risk. Startups take the risk because they have little/nothing to lose.

[moneywoes]

Is wealth management open for disruption?