Sunday, November 20, 2005

Why do some company have more spin outs than others?

Recently, Dolph Bell of the Greenville News wrote an excellent article, The Children of Fluor. It is not well understood how important major companies are to stimulating the creation of entrepreneurial ones in their sector. This story highlights a great example of the benefits of clustering. In places like Austin or Silicon Valley, there would be lots of examples like this. Here, there are only a few.

Previously I have commented on how important this phenomena is. We have a culture that creates lots of community banks, but not technology companies.

Les McCraw, former Fluor CEO, opined that there were more Fluor spin-outs than at other large companies because "the skills that Fluor employees possess are typically more "transportable" than the more specialized skills of employees at other large corporations in Greenville such as BMW, Michelin or General Electric. Fluor is a services company, selling a range of services to a variety of clients, he noted, while BMW, Michelin and GE are manufacturers focused on making specific products."

I'm not sure it's really true that the skills of people were less transportable at Liberty Corp or at Multimedia, just to name a couple of major Greenville companies in the past couple of decades, but they didn't spawn 12 spin-out companies. I think there are much more challenging cultural issues at play.

What do you think? Why do some large companies have more spin-outs than others?

1 comment:

Chris Klasing said...

John

I observe a lot of companies these days and spent a long career working for one. I think most companies, large or small, are pretty insular -- they have strong corporate biases and corporate cultures that don't readily accept ideas from outside the company. This sort of tight culture does not encourage spin-outs. Employees get the idea that they only know how to thrive in that particular culture.

Service companies like Fluor are the exception, because their employees get to see a lot of other company cultures in their clients. It's no accident that engineeering/construction companies like Fluor also typically have high turnover of professional employees.

Other similar cultures I have observed are CPA firms, management consulting firms, and some (but not all) universities. Most manufacturing firms are more inward-looking.

So what does this imply for our desires to be a more competitive and innovative economy? Maybe that a bigger services sector is not so bad after all.

Chris Klasing