Today’s corporations are struggling to survive for very long. Technological advances can take such sharp turns so quickly, that huge companies are often behind the times before they can figure out what happened. Very few corporations actually make it to 40 years old anymore, according to a study of over six million firms by management professors Charles I. Stubbart and Michael B. Knight.
“Despite their size, their vast financial and human resources, average large firms do not ‘live’ as long as ordinary Americans.” They use the examples of large companies such as Eastman Kodak Co., Blockbuster Inc., and Barnes & Noble Inc. These companies and more are finding themselves unequipped to catch up once they notice that their greatest money-makers are trending in another direction.
Experts say that the companies surviving are the ones that are “ruthless about change”. They are “not afraid to cannibalize their big revenue generators to build new business”. Companies are finding it necessary to take all kinds of new risks in order to keep from “missing the boat”. They are trying to bring in new technologies by making multiple, smaller acquisitions that open them up to new markets. Things for large corporations are a lot less predictable than they were 15 years ago.
Take IBM, for example. They have survived for over 100 years. They have always been passionate about embracing new technologies. That’s how they’ve come from selling meat and cheese slicers in the early 1900’s to their more recent “aggressive acquisitions of dozens of small companies that expanded IBM’s high-margin software and consulting businesses.”
Not only were they buying into new technological areas, but they were also selling off the company’s “vaunted personal computer business” way back in 2004, “before PCs had been largely commoditized”.
Former CEO Samuel J. Palmisano said in an interview last year that “We’ve lasted 100 years, because we never limited ourselves to a view of a particular product.”
Other companies, like Hewlett Packard, were slow to jump in when business software was emerging, and have been spending a lot of money trying to catch up. Harvard Business School professor Rosabeth Kanter said that “HP has been trying to do everything IBM is doing but five years late.”
Apple is a shining example of a company not eaten up by “creative destruction”. According to a recent article in The Wall Street Journal, in the early 1990’s, Apple’s innovative CEO Steve Jobs “refreshed their PC line and carved out a dominating position in digital music with the iPod. But he readily put both of those businesses at risk the new products several years later.” He “cannibalized the iPod with the iPhone”. He did the same to the PC and notebook businesses by launching the iPad tablet computer.
A lot of big companies will tell you that there is a lot of luck involved, but the difference in being successful long-term or not seems to depend on a company’s ability to innovate.
Sources: http://online.wsj.com/article/SB10001424052970204331304577144980247499346.html
About the Author: Nelson R. Cabrera is the Business Development Manager of Lilly & Associates International, a transportation and logistics company specializing in ocean freight and ocean shipping services. For more information, please visit http://www.shiplilly.com/.
