If you take a look at the first Fortune 500 companies list of 1955 and compare it with the Fortune 500 list of last year, 2019 you would notice that only 52 companies that appear in both the lists have remained in the top 500 list since inception. That’s a remarkable "death" rate. Only 10.4 per cent of the Fortune 500 companies in 1955 has remained on the list. The rest have packed up, gone bankrupt, merged with or acquired by others.
Through the years, the troubles at revered companies such as IBM, Polaroid, Motorola, Maytag, HP, Delta Airlines, Kodak, Raychem, Amdahl, Kmart, DEC and others have been the stuff of case studies on topics ranging from strategic mastery to scandal.
The modern corporation is an institution which is most exposed to failure.
The important question is what makes ‘successful longevity’ possible. Companies can live, die, mutate, merge but brands are expected to remain forever.
When markets are very profitable, new entrants are attracted. From having too few firms in the market before long there will be too many. Profits tend to zero. This is theoretical, classical economics and does not correspond to reality. Brands ensure different trajectories for businesses. Financial adventurism, short-term profit mindedness and management myopia can tank companies with great brands. As a general rule, brands help amplify the benefit of the virtuous cycle and mitigate the damage of the vicious cycle in the market.
.On the other hand, the neglect of the brand leads to a negative or a vicious spiral. Those who are behind fall further behind. Returns get diminished. The squeeze leads to a declining pace of innovation and this in turn erodes differentiation even further.
Successful companies and brands can fail because they are unable to retain the edge on learning, adaptation and innovation/renovation. Therefore, the moment the cycle turns to the declining side they are unable to change. Success makes brand management arrogant, complacent or plainly greedy. They ignore new technologies, customer service and innovation. They stop listening to customers and lose empathy. They stop hiring new talent or rewarding productive talent. Basically, they don’t want to change.
“Nothing fails like success,” wrote Richard Pascale in his wonderful book ‘Managing on the edge’ published in 1990. If you have laurels, try not to rest on them. Remember your greatest strengths are also weaknesses. Don’t be so enamoured with what you do best, that you fail to realise that the world around you is changing.
There are situations that analysts have identified as precursors to the disintegration of most brands. A crisis is top on the list. Needs change in times of crisis. No matter what your product is, a review and redesign to meet prevalent needs are vital especially during a crisis because people are not loyal to your products; they are only loyal to their needs. Consumption patterns and priority change in times of crisis. Who would ever think that hand sanitisers, hand washes and face masks would ever blow like this? COVID-19 has taught us better.
Following closely is the Need for Change. A business that cannot respond to change would in no time sink into oblivion. In his book, the Origin Of Species, Charles Darwin said: “It is not the strongest of the species that survive, nor the most intelligent, but the one more responsive to change.”This explains why the ‘almighty’ dinosaurs are nowhere to be found, but the common earthworms are everywhere. It explains why the ‘almighty’ Nokia phones have all disappeared from the market and Infinix is taking charge.
Another pathetic story of what resistance to change can cost a company is that of Kodak. Kodak held the world spellbound through photography for over 131 years but ultimately ended up bankrupt. The tragic end of Kodak is a pointer to the fact that change is an integral part of the evolution of any formidable brand.
There are a lot of reasons why Kodak failed, but refusing to adapt to the changing market and not being on the cutting edge of photo-technology is the prime reason. The slow response of Kodak in embracing digital photography signalled its doom.
Kodak lost its relevance because of its inability to take the lead in moving from producing traditional film cameras to digital technology. By the time Kodak decided to move from analog to digital, the digital market was already starting its decline.
New technology had emerged and Kodak fought to remain relevant, but “change” gladiators had already won the battle. They delayed digital transformation and paid the supreme price for it. No business owns tomorrow. It is not by strength; it is by being adaptable to change.
Availability of Cash Flow is another factor. In business, cash flow is king. You might want to ask the nine out of 10 businesses that have failed because of cash flow problems. Cash flow management determines which business would crash, struggle, survive or thrive. To capture it succinctly, it means doing everything possible (and legally) to ensure that money flows into your business as quickly as possible and exits as slowly as possible. If you still want your business to flow, then mind your cash flow.
The poverty status of any individual or brand is a reflection of its inability to think creatively. The purpose of every difficult time is to put a demand on our creativity. When creativity shows up and is acted upon, scarcity can be transformed into wealth. If your business is not creating something new to meet newer needs, then it is as good as you no longer exist.
Complacency is another key factor that precedes brand failure.
The greatest hindrance to success is not failure, but the previous success. When you let your previous success get too much into your head, you would sabotage your own effort to push for more. Your previous success can hinder you and your brand from moving to the next level when you become so full of them.
Don’t build your future on your previous successes; let them give you more impetus to be more successful. You must continuously work at breaking your own records and not building monuments around them. Our business in life is not to get ahead of others, but to get ahead of ourselves, to break our own records, to outstrip our yesterday by today and to do our work with more force than ever before.
To achieve great success, we must develop an infinite capacity to outstrip our previous records.
Another key factor is Continuous Improvement. Great companies make continuous improvement. Rory Vaden said: “Success is never owned; it is only rented and the rent is due every day.” The price that every organisation would have to pay for success is continuous improvement.
The Japanese economy was revolutionised through the culture of unending improvement, called Kaizen. The competitive success of Japan in the world’s market place is greatly as a result of their implementation of the Kaizen concept in their corporations. Instead of making improvement on an occasional basis, the Kaizen culture looks for uninterrupted, ongoing and incremental daily change.
Whether you are creating a new business plan or revamping an old one, knowing what your competitors are up to can save your business. Your competitors can kill your business if you are not offering something different from theirs. Doing a competitive analysis can give you a serious edge above your competitors and buoy up your market share. This analysis gives you a chance to look closely at your market and your competition, to learn what the others are doing and why.
Companies that yearly update their plans should always include a competitive analysis to catch changes in the marketplace and in their competition, while startups need to know the landscape before they begin.
To thrive in the midst of your competitors, your business must have a Unique Selling Point (USP). Though you must not make your competitors the object of your focus, neglecting them can also be at your own peril. Study and know your competitors, learn from their mistakes, know their strengths and consolidate on their weaknesses.