Bureaucracies slow decision making
One reason that large firms may miss new opportunities is that slow bureaucratic decision-making may make it difficult for individuals in the company to push the new opportunity. Innovations may require multiple levels of approval to be pursued and commercialized – slowing down the company’s ability to pursue new ideas. IF employees feel likely their suggestions will only get held up in committee meetings, with little recognition for raising new suggestions, they may stop raising new ideas.
The market size of the new opportunity starts off small
Another reason that large firms may miss new opportunities is that the new markets may initially start off very small. For an opportunity to appear worthwhile to a large firm it must be of sufficient market size – a $100,000 market may not be worthwhile for multiple million-dollar firms to pursue.
The issue however arises that many markets often start off relatively small – potentially not large enough to attract the attention of larger firms. It is only after smaller firms have entered and grown the markets that larger firms look and take notice – potentially after the opportunity has been missed.
The new market targets a different group of customers
Another reason that large firms may miss the opportunities of new markets is that they target a different group of customers than large firms were previously targetting. Non-customers, who do not currently buy a product, may be targeted by the new innovation.
Existing large firms may pay disproportional attention to their existing customers – not listening to other underserved groups. By ignoring the segment of the market that doesn’t currently buy their product, they may miss opportunities that come from this area.
The new opportunity requires new ways of operating
Another reason that large firms may miss new opportunities is that such areas would require substantial changes to their operations. Potentially the new opportunity undercuts a company’s existing advantage – making the firm very reluctant to embrace the change. The existing resources, capabilities, and organizational routines make the firm rigid – resulting in it either deciding against, or struggling to adopt a new opportunity.