Business Success Is Happening Faster Than Ever, But So Is Failure. How To Adapt.
To improve is to change; to be perfect is to change often. — Winston Churchill
In many ways it’s never been easier to become rich and famous. We are told that all we need to do is write an article or build an App and voila, we’re an international success story. What used to take decades can now happen in what seems like a blink of the eye. Yet for every story of rags to riches lies an equal story of abject failure.
The current business reality is stark, three out of four companies on the S&P 500 list today will disappear into obscurity by 2027. What was once a 61-year life span for the average firm on the S&P 500 in 1958 narrowed to 25 years in 1980—to 18 years today. At the center of this trend are the side effects of the transformative effects of the exponential growth found in modern technology.
In a recent book, Physics of the Future, by renowned theoretical physicist Michio Kaku, he writes how exponential growth is often hard to grasp, since our minds tend to think linearly. “It often starts deceptively slowly. It is so gradual that you sometimes cannot experience the change at all. But over decades, it can completely alter everything around us.”
This type of exponential growth in technology is often described as “Moore’s Law.” Less a law and more of an observation, it was originally made by Intel co-founder Gordon Moore in 1965 when he noticed that the number of transistors per square inch on integrated circuits had doubled every year since their invention. Recently it’s become apparent that Moore’s Law is no longer limited purely to computing processes, but has expanded to include a dramatic impact on all parts of our world. As our ability to compute continues to increase so does the effect it has on all the things around us.
Driven in part by the emergence of computers, then the Internet and now ubiquitous connected technology, this exponential growth is affecting almost all aspects of business. The time it takes to get a job done is constantly decreasing leading to unexpected consequences. The increase in speed and efficiency has become a key business driver enabling businesses to evolve at ever increasing speeds. While decreasing the time it takes to achieve success, it has also greatly reduced the time it takes for a business to go from success to failure. This could potentially be the reason that over the last decade half of the S&P 500 have been replaced.
A key part of the puzzle is the theory of “Creative destruction.” A concept originally devised by Austrian-American economist Joseph Schumpeter (1883-1950) who studied the formation and bankruptcy of companies in Europe and the United States. He concluded that, “economic progress, in capitalist society, means turmoil.” Schumpeter believed that Creative destruction is the “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
Richard Foster, in his 2001 book Creative Destruction, applied Schumpeter’s theory to the modern practices of management and innovation. According to Foster, the life span of a corporation is determined by balancing three management imperatives:
- running operations effectively,
- creating new businesses which meet customer needs, and
- shedding business that once might have been core but now no longer meet company standards for growth and return.
The challenge is that there is often a direct conflict between accelerating rates of change versus the people operating the current business who are hesitant to change. Ultimately once you’ve reached a certain level of success, that very success blinds you to the fact that you need to adapt to an ever-increasing level of change within the markets you are operating in.
Ultimately the only certainty in business is change. To avoid becoming disrupted might be as simple as assuming your company is on the verge of complete failure.
I think Steve Jobs said it best “For the past 33 years, I have looked in the mirror every morning and asked myself: ‘If today were the last day of my life, would I want to do what I am about to do today?’ And whenever the answer has been ‘No’ for too many days in a row, I know I need to change something.”
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