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Why Large Companies Should Out-Innovate Small Ones

Dan Hesse SM '89: November 2, 2006; Running Time: 53:21

About the Lecture

About the Lecture

Given the choice, Dan Hesse would opt for working in a big company rather than a small one, especially when it comes to innovating. He backs up this preference with years of experience, from his days running a start up (“It was really hard work”) to leading some of AT&T’s pioneer telecom ventures.

Hesse first describes some of his formative projects for AT&T, including the “all you can eat” long distance WATTS line and AT&T’s first internet and wireless divisions. What he learned was how to “sit down with the guys in the labs,” and also with customers, applying market research to generate new inventions. He came to appreciate AT&T’s very deep pockets for R&D, which made it possible for “the large guy to completely change the game” and “make it almost impossible for smaller guys to compete.”

His new enterprise, Embarq, (an offshoot of Sprint Nextel) is the nation’s 4th largest local telephone company, present in 18 states with $6.5 billion in revenues. Hesse is determined to fight the slow but relentless loss of market share to wireless and cable companies. His plan involves changing the image of the firm “to get customers to embrace innovation” and try Embarq’s new products, which include: One Voicemail, a service that provides a single voicemail messaging system for home and wireless phones; Smart Connect, which enables an Embarq phone user to switch transparently from mobile frequencies to Wi-Fi as the phone moves from outside to inside; Media Safe, 25gb of internet storage for Embarq’s DSL subscribers to stow their videos and tunes; and the Offer, a company promise not to raise the DSL subscription price – ever.

He offers general advice on innovating, especially aimed at large firms that “typically don’t innovate because they’re too comfortable.” He suggests integrating across platforms to make life simpler for customers; cultivating a competitive corporate culture, in which delegation, teamwork and employee recognition play important roles; studying the market; incubating new projects while maintaining steady revenues in the old business; figuring out a business model that “gets things down to single-user economics;” and “shamelessly stealing good ideas.” Most important, when it comes to creating the next new thing, nothing beats leveraging the assets of a large company. When customers trust the company and the brand, marketing new ideas is easier, concludes Hesse.

Lecture Details

Location: E51-115

About the Speaker

Dan Hesse SM '89

Chairman and CEO, Embarq Corporation

Dan Hesse joined Sprint in June 2005 to lead the effort to create Embarq, which separated from Sprint Nextel in May 2006. Embarq generates over $6 billion in revenues annually, providing voice, data, wireless and entertainment services in 18 states.

Previously, Hesse spent 23 years at AT&T. From 1997 to 2000, he served as the president and chief executive officer of AT&T Wireless Services, at the time the United States’ largest wireless operator with over 12 million customers.

Hesse has been named Wireless Industry “Person of the Year” by RCR Magazine and “Executive of the Year” by Wireless Business and Technology Magazine. He is also a recipient of the Ellis Island Medal of Honor.

Hesse received an M.S. degree from the Massachusetts Institute of Technology, an M.B.A., with distinction, from Cornell University, and a B.A., with honors, from the University of Notre Dame.