As a result of this blog you and your organization will learn how to:

• Understand that Capitalism, unlike some businesses, assumes that “only best value will enjoy continued success”
• Learn why less than 25% of today’s major corporations will survive the next quarter century.
• Know that a business follows the same stages of emotional growth as a person and how to react in each stage.

In today’s business atmosphere, even the world’s most admired companies have been unable to sustain staying on top of the market for more than 10 to 15 years. The first Standard & Poor’s index, published in the 1920’s, included 90 companies who remained on the list for an average of 65 years. In 1998, their average life span shrank to a decade. Since then, the margin is getting smaller and smaller.

Capitalism and free markets encourage the creation of new organizations and destroy the old when they stop performing. The market doesn’t agonize over firing 3 people or 30,000. It is infinitely generous in starting a company and just as infinitely ruthless in ending it. Performance is the only criterion.

Far too often, many of today’s successful organizations are run by people who have thoughts, opinions, feelings but, worst of all, the assumption of “continued success.” Generally, the more successful an organization becomes the more unsuccessful it becomes at making changes in order to stay ahead of the competition.

In Repositioning, Marketing in an Era of Competition,Change,and Crisis, McGraw-Hill, 2010, authors Jack Trout and Steve Rivkin say,” With size comes a large degree of inflexibility, ego, vested interests, and other bad things that hamstring a company in this age of the unpre­dictable. Just look around you at the wreckages of our largest institutions, such as AIG, GM, Merrill Lynch, Citicorp, and others.

In the 21^st century, advances in technology, management methods, information technology, a shift from goods to services, and a rise in labor productivity, all led to declining costs and greater efficiency. The MIT Sloan Management Review cautions that by not fully understanding the new concepts and practices, less than 25% of today’s major corporations will survive the next 25 years.

Mature business organizations can flourish only if they avoid the “continued success” syndrome. That was how Johnson & Johnson overtook Bayer with Tylenol. Sterling Drug owned the Bayer brand and had 50 years of success. However, Sterling Drug showed typical signs of the mature corporation. It steadfastly refused to introduce its own non-aspirin pain reliever because it would compete with its Bayer brand. Sterling Drug had all the same information that Johnson & Johnson had about the market changing, but it didn’t act.

Another example lies in the computer hardware industry where IBM dominated the market in the 1960’s and early 70’s. However, at the same time, IBM was leaving large segments of the marketplace under-served. That attracted entrepreneurs, who brought so many new entrants to life that the market was flooded, and by 1982, margins throughout the industry were eroding.

You must understand that a business follows the same stages of emotional growth as a person.

• The early years are passionate with decisions made from the gut.
• As organizations mature, rational decision-making is born, more data gathered, and analysis performed.
• This analysis may eventually slow the company’s present course leading to a bleak future.

During the analysis stage, unlike Sterling Drug and IBM, mature business organizations must act on new information and change. Most “mature” organizations deny it and move to protect existing business. They set up defenses against new ideas, and kill all bearers of bad news. Instead of destroying the old business and creating the new, they concentrate on execution and incremental improvement.

Predictable results? Every business owner and manager must learn that over performance and high profits always attracts new entrants who are frequently able to do it faster, cheaper and better. Unless the myth of “continued success” is overcome the current leader is always replaced by someone else because of its own complacency.

John Sterman of MIT, studied the ability of mature companies to learn. His research found that those companies seem to panic in complex situations and do everything wrong. The more experience they have, the worse it is.

The twenty first century offers great opportunities for every business regardless of its size. But those opportunities are extended only to those organizations that are willing to accept change as a natural part of sustained growth.

Questions for discussion:

If we are large, how can we, like Johnson & Johnson capture market leadership from a competitor? If we are small and nimble, what opportunities can we exploit from larger and more complacent companies?

Regardless of our current size, what phase of the business cycle is our organization in now and how can we increase our level of passion and rapidness of decision-making?