Ask any manager on planet Earth, “What is your key challenge?” and among many different responses one will strike you with remarkable consistency: Staying afloat. The fast-moving roller-coaster economy we live in today makes this task increasingly difficult. Just as we handle one crisis, another looms around the corner. How can we sustain— and even thrive?
The answer is the one you’ve heard before: We must consistently remake who we are, what we offer, and how we deliver our offerings to the world. Put it simply, we must reinvent. What you may not have heard before is this: Today, the frequency with which our reinvention must take place is staggering. Essentially, we must become a new company every three years.
Let me explain.
Once upon a time, our companies enjoyed long and healthy lives, with a slow rise to the top of financial performance and a gradual decline to annihilation. The rate of change was so slow that reinvention was rarely needed – and when it was, we had all the time in the world to renew our business on our term. But the fairy tale is long gone.
As Steve Denning of Forbes puts it:
“Fifty years ago, ‘milking the cash cow’ could go on for many decades. What’s different today is that globalization and the shift in power in the marketplace from buyer to seller is dramatically shortening the life expectancy of firms that are merely milking their cash cows. Half a century ago, the life expectancy of a firm in the Fortune 500 was around 75 years. Now it’s less than 15 years and declining even further.”
Denning’s claims are supported by research conducted by the Deloitte Center for the Edge in 2001, which is about how corporate life cycles were diminishing rapidly. Yet, much has happened since 2001.
The increasing level of globalization, showcased so painfully during 2008-2009 global economic crisis, powered by the ever-increasing access to knowledge (think Google, free online courses and MOOCs, Khan Academy, etc), means that more of us are inventing every day and sharing those inventions globally, than ever before. There is more start up activity today than ever before, but they also continue to die at a high rate: only one-third survives to the 10-year mark. With all these pressures, the demand for corporate (economic, communal, and personal) reinvention has grown even further. Today, the life cycle of the company is much closer to 5-7 years than it is to 15 years.
Does it mean that we are all doomed? Absolutely not. What separates companies that survive from those that go down is the ability to start a new lifecycle, to pivot their company far enough from the path of destruction to find a new opportunity for growth:
But if before you had 30+ years to reach the prime, today you might only have 3 years. That means that barely 2-3 years into your existing business reality, you must start the reinvention cycle anew.
(Shocking, isn’t it? Kodak and Nokia thought so, too. Kodak had been the staple of American culture throughout 20thcentury, selling at one point 90% of all photographic film and 85% of all cameras in the United States. Nokia had been the number one cell phone seller from 1998 to 2007, controlling at its prime 40% of the entire global handset market. Yet, Kodak filed for bankruptcy in 2012, while Nokia was forced to sell its telecom business to Microsoft in 2013 to save itself from its own bankruptcy.)
The business you are in today cannot be the business you’ll be in 3 years from now. By then, you are either entering your new business or you are on the way to extinction. Period.
Photo credit: Jennifer Bennett