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