In 1960’s, the average lifespan of a Fortune 500 company was 75 years; today, it is less than 15 years, and getting shorter (Source: Korn Ferry). One-tenth of public companies disappear each year. That is 4x the mortality rate since 1965. The average life span of a company has halved since 1970.
Their traditional source of advantage was compromised, and they were too short-term focused to see this threat. Failure to take the long view is a result of past success, called the “success trap.” This failure to see the threat is due to a lack of strategic renewal.
During the strategic planning process, there should be a structured, organized thought process to identify threats, disruptions and opportunities. Widen the audience and sources of intelligence, so that you are not isolated. It is an analysis both internal (define, validate, or redefine the vision, mission, and direction of the company) and external (identifying the megatrends that can alter the business environment). With the change to a new opportunity, you need agility and preparedness. After that, you must then invest in execution and monitoring.
Philips shifted from consumer electronics to the health care sector, moving from a commoditized traditional consumer electronics business to a demographic upwards trend of an aging population. BIC transitioned from a pen company, to a broad-based disposable-device company (lighters, shavers, etc.) (Source: BCG).
Is your traditional source of advantage at risk of being compromised?
