Home > For the Captain: Create an innovation culture > Privately-held v Publicly-held companies drive two different types of innovation

Privately-held v Publicly-held companies drive two different types of innovation

Camper, Lego, Nike, Bose, Ikea , Rolex, Sony, Swatch , Alessi.

From the list above, the reaction towards one brand over the other is subject to one’s experience of the product. It is influenced by the size, product range and marketing and advertising strategies of the companies. The list looks like a random choice of companies, but in fact I have chosen these companies to compare privately-held and publicly-held: does that make a difference in terms of innovation?

The table below shows some key differences between the two types of companies.

  Privately-held Publicly-held
Ownership structure Typically family owned or small group of investors i.e. founders of the company Public company – with many shareholders and investors. It offers its securities (stock/shares, bonds/loans, etc.) for sale to the general public
Capital Private funding, reinvestment of profits, research partnerships to find new markets/applications (which in turn also gives access to additional funding) Access to financial markets; to raise funds. Capital can also be raised through the sale of its securities
Financial earnings Not required to disclose financial information Required to file quarterly earnings reports
Age (basis 2012) Typically from 50 years to more than a century old On average about 30-40 years
Product portfolio Focused on core products Diversified via acquisition of other products/brands
Speed to market Slow Fast
Product differentiation Research, concept, imagination, passion, quality, lifestyle, elegance Consumer-driven, availability, marketing/advertising
Pricing Affordable to expensive Typically affordable

 Privately-held companies have more flexibility and freedom to reach out to some ideas that are different. This can be regarded as passion innovation to create products that are close to the core values of the company, whilst also reflecting the unspoken dreams of customers. The ideas are allowed to mature before becoming a tangible product. This could take time but there is no hurry or pressure because emphasis is given to detailed research to ensure high quality products that they can be proud and confident of. Mallorca-based Camper is a good example of why these companies prefer to remain private as they can pursue a dream without letting administrative or managerial functions take away the emotional component of the business. These companies appear to have been able to sustain over time by finding the right balance integrating emotional and business intelligence. In addition, a deeper bond with their customers would typically enable them to drive more loyalty, sometimes across generations.

In the meantime, publicly-held companies are typically the forerunners of fast innovation to increase throughput and speed to market. The rate of new products in the market, typically attributed to pressures from shareholders, shows the fast pace at which ideas are progressed through the research and development funnel before becoming a useful product for consumers. This, nevertheless, is important to meet the demands of the ever-changing consumer market and reach out to developing and emerging markets. In addition, access to capital gives these companies the resources needed for faster growth. Inevitably, having shareholders also means that the areas chosen for new research and development are strategically driven. The investment in marketing and corporate advertising helps these companies in branding and catching the attention of consumers.

Both types are certainly important as ultimately these companies, private or public, invest their time, effort and money to ensure continuous churning of new ideas in the form of new products, services or technologies. The differences are insightful to appreciate how innovation drives the two types of companies to meet the consumer at a different level to ensure profitability and sustainability in different ways.

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  1. May 13, 2012 at 23:28

    It’s nice to see that the innovating process is still strong with some companies. It’s a shame that some, but not all, companies are losing confidence and trending toward discarding innovation even with the upcoming elastic business future on the horizon. I was thinking the other day, what if companies could go to one website to find a multitude of tools and methods to innovate with other users, from universities and student research to individual inventors, all in one place? It is inspirational that there are sites out there, like Beehive Innovations, dedicated toward innovating the innovation process and helping companies better their processes, products and ideas. I just felt led to introduce that company, as it is a meeting place where crowdsourcing meets social networking, with an infrastructure toward keeping businesses equipped for what the future economy holds. But, apparently, that just scratches the surface of what they are trying to do. If you’re interested, check out http://www.beehiveinnovations.com and learn more!

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