The Economist, while reporting recently on the 100 years of IBM, said businesses founded on an idea last longer than ones based on a specific product(s) or service. It is common knowledge that only <2% of the Companies that were leaders five decades ago are still surviving. And going forward, only that many will be around in 50 years. Studies show that the average life span of a company is about 12.5 years!!
Leading businesses of today will slowly fade away over the next few decades. The reasons for such an evolution are what I will refer by the acronym, OUCH!
OUCH!
Firstly, Obsolescence (of the product or service), second, Unsustainability due to regulatory changes (Government banning the product for any reason or evidence that such a product causes harm to health, safety and environment), third, Competition (coming up with a better value-proposition or a more innovative product or service) and the final one simply is Hubris that sets in within the company owing to its leadership.
Obsolescence
Imagine you had this lovely state-of-the-art factory for making spare parts for a typewriter or for a Lambretta scooter or for an old HMV Gramaphone player? How about a factory to make the LP records or audio cassettes? What about the guys who made carbon paper or floppy disks? Would you be in business today or product obsolescence would have killed the enterprise? Sounds like trouble, right?
Unsustainability
Emerging legal and regulations on health, environment and safety concerns that precede or precipitate Government regulations can finish off a product and a business. Think of companies that were making the pesticide, DDT in the 60s or 70s or the ones who are still making Endosulfan. What about tobacco and cigarettes companies in many Western countries? Trouble!!
Competition
It is arguably the single biggest cause for death of Companies and businesses (and even dynasties and civilizations)! Competition always makes life difficult - they come up with better strategies, better products, technology, and innovations that either render the products and services of older established ones obsolete or make them look too slow or too weak or too outdated. See what electronic typewriters did to the old manual machines and then personal computers and printers did to electronic typewriters? We see digital music and iPods doing this to music players and the music industry as a whole. Google did it to Yahoo and other search engines of yore. Wonder what’s become of Hotmail now, the rage of the mid-90s? The internet and mobile telephony finished off faxes and telegrams. The overnight couriers are doing to post offices what mobile telephony is doing to landline telephones.
Hubris!
This is by far the most interesting and the most destructive. When a Company and its products are by far the best and there is no alternative in sight, the Management, the owners, the employees start to get arrogant. They fail to see the emerging threats to their survival, blinded by success or the possible chinks in their armour that their competitors or other detractors could see and exploit. And slowly the rot sets in as they fail to innovate or expand capabilities or improve service levels. Impending death may wake them up but oftentimes too late. It happened to the Railroad companies in the US in the 1930s. You see it playing out right now at Nokia, the global leader in mobile phones and networks. Hubris is what we used to see among the staff of BSNL or Indian Airlines or Nationalized banks before deregulation and liberalization happened.
A good example of Hubris is Prince Duryodhan and the Kauravas in the epic Mahabharata. While Kauravas spoke ad nauseum of war, their competition, the Pandavas strongly advocated and articulated peace. However, the hubris of the Kauravas did them in as they did not see the Pandavas, while still in exile, meticulously preparing for the War - building up their networks and capabilities, striking key alliances, procuring sophisticated weapon systems and planning the logistics for an extended battle. Kauravas did none of this as they never saw their own vulnerabilities.
Leaving aside hubris, all other causes of death of an enterprise can be overcome by simply founding it around an idea rather than a specific product or service. This way, any fast developing opportunity or threat or potentially debilitating scenario can be countered by innovation or improving the product or service being offered or changing the way of doing things. One great example is the American conglomerate GE, a company founded in 1892. It has survived and thrived for 120 years because it is founded on a simple premise of "bringing good things to life". Thus, as the times and lifestyles change, the so called "good things" that people need changes. And GE, with its vast innovation engine, forward looking leaders and war chest of cash, was there one step ahead to move in and bring these “new” good things to lives of people. Trains or Railways in Europe and Japan, with their philosophy of providing efficient and cost-effective transportation to common folks, have survived by accepting the disruption caused by low-cost Airlines. They now provide transport solutions to people through both faster trains and complementary last-mile connectivity by having stations within the Airports. This is something the Indian or American Railways never did and find themselves threatened by other emerging modes of transportation. Intel, the very successful American chip-maker, survived an impending death and disaster in the mid 80s by quickly reinventing itself and focusing on innovation and killing off their commoditized products and moving to higher level ones. Nokia, a 140-year old Finnish company and a world leader in mobile phones, started life as a company making paper, rubber products and shoes before diversifying into electronics and telecommunication (They are in a spot of trouble right now but may yet survive by joining up with Microsoft). Maybe, the unstated premise for Nokia over the century was also to bring good things to enrich lives of people!!
And while we celebrate the spirit of survival of these giant corporations, we also see death all around - where is Remington - the typewriter company? Where is US Steel or Calculators from HP or Texas Instruments? Coming to India, where is Allwyn Fridge, Dyanora or Solidaire TVs? Or Beetel telephones, Siva computers, or the ubiquitous Murphy radios? What about Dunlop tyres, Umrao or Janata kerosene Stoves, Dalda Vanaspati Ghee, and Ashok razor blades? OUCH! I guess......
On the lighter side, I simply love Dr. Vijay Mallya, the boss of Kingfisher. He has a simple philosophy for his companies, i.e., to give people a true high. So the product can be beer one day or Black Dog Scotch Whisky the next or an airline (literally giving people a high), or a T20 franchise with scantily clad cheerleaders or most importantly the swimsuit calendars. What better enduring vision for a Company than this......?
Leading businesses of today will slowly fade away over the next few decades. The reasons for such an evolution are what I will refer by the acronym, OUCH!
OUCH!
Firstly, Obsolescence (of the product or service), second, Unsustainability due to regulatory changes (Government banning the product for any reason or evidence that such a product causes harm to health, safety and environment), third, Competition (coming up with a better value-proposition or a more innovative product or service) and the final one simply is Hubris that sets in within the company owing to its leadership.
Obsolescence
Imagine you had this lovely state-of-the-art factory for making spare parts for a typewriter or for a Lambretta scooter or for an old HMV Gramaphone player? How about a factory to make the LP records or audio cassettes? What about the guys who made carbon paper or floppy disks? Would you be in business today or product obsolescence would have killed the enterprise? Sounds like trouble, right?
Unsustainability
Emerging legal and regulations on health, environment and safety concerns that precede or precipitate Government regulations can finish off a product and a business. Think of companies that were making the pesticide, DDT in the 60s or 70s or the ones who are still making Endosulfan. What about tobacco and cigarettes companies in many Western countries? Trouble!!
Competition
It is arguably the single biggest cause for death of Companies and businesses (and even dynasties and civilizations)! Competition always makes life difficult - they come up with better strategies, better products, technology, and innovations that either render the products and services of older established ones obsolete or make them look too slow or too weak or too outdated. See what electronic typewriters did to the old manual machines and then personal computers and printers did to electronic typewriters? We see digital music and iPods doing this to music players and the music industry as a whole. Google did it to Yahoo and other search engines of yore. Wonder what’s become of Hotmail now, the rage of the mid-90s? The internet and mobile telephony finished off faxes and telegrams. The overnight couriers are doing to post offices what mobile telephony is doing to landline telephones.
Hubris!
This is by far the most interesting and the most destructive. When a Company and its products are by far the best and there is no alternative in sight, the Management, the owners, the employees start to get arrogant. They fail to see the emerging threats to their survival, blinded by success or the possible chinks in their armour that their competitors or other detractors could see and exploit. And slowly the rot sets in as they fail to innovate or expand capabilities or improve service levels. Impending death may wake them up but oftentimes too late. It happened to the Railroad companies in the US in the 1930s. You see it playing out right now at Nokia, the global leader in mobile phones and networks. Hubris is what we used to see among the staff of BSNL or Indian Airlines or Nationalized banks before deregulation and liberalization happened.
A good example of Hubris is Prince Duryodhan and the Kauravas in the epic Mahabharata. While Kauravas spoke ad nauseum of war, their competition, the Pandavas strongly advocated and articulated peace. However, the hubris of the Kauravas did them in as they did not see the Pandavas, while still in exile, meticulously preparing for the War - building up their networks and capabilities, striking key alliances, procuring sophisticated weapon systems and planning the logistics for an extended battle. Kauravas did none of this as they never saw their own vulnerabilities.
Leaving aside hubris, all other causes of death of an enterprise can be overcome by simply founding it around an idea rather than a specific product or service. This way, any fast developing opportunity or threat or potentially debilitating scenario can be countered by innovation or improving the product or service being offered or changing the way of doing things. One great example is the American conglomerate GE, a company founded in 1892. It has survived and thrived for 120 years because it is founded on a simple premise of "bringing good things to life". Thus, as the times and lifestyles change, the so called "good things" that people need changes. And GE, with its vast innovation engine, forward looking leaders and war chest of cash, was there one step ahead to move in and bring these “new” good things to lives of people. Trains or Railways in Europe and Japan, with their philosophy of providing efficient and cost-effective transportation to common folks, have survived by accepting the disruption caused by low-cost Airlines. They now provide transport solutions to people through both faster trains and complementary last-mile connectivity by having stations within the Airports. This is something the Indian or American Railways never did and find themselves threatened by other emerging modes of transportation. Intel, the very successful American chip-maker, survived an impending death and disaster in the mid 80s by quickly reinventing itself and focusing on innovation and killing off their commoditized products and moving to higher level ones. Nokia, a 140-year old Finnish company and a world leader in mobile phones, started life as a company making paper, rubber products and shoes before diversifying into electronics and telecommunication (They are in a spot of trouble right now but may yet survive by joining up with Microsoft). Maybe, the unstated premise for Nokia over the century was also to bring good things to enrich lives of people!!
And while we celebrate the spirit of survival of these giant corporations, we also see death all around - where is Remington - the typewriter company? Where is US Steel or Calculators from HP or Texas Instruments? Coming to India, where is Allwyn Fridge, Dyanora or Solidaire TVs? Or Beetel telephones, Siva computers, or the ubiquitous Murphy radios? What about Dunlop tyres, Umrao or Janata kerosene Stoves, Dalda Vanaspati Ghee, and Ashok razor blades? OUCH! I guess......
On the lighter side, I simply love Dr. Vijay Mallya, the boss of Kingfisher. He has a simple philosophy for his companies, i.e., to give people a true high. So the product can be beer one day or Black Dog Scotch Whisky the next or an airline (literally giving people a high), or a T20 franchise with scantily clad cheerleaders or most importantly the swimsuit calendars. What better enduring vision for a Company than this......?
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