Business has many casualties – but many do last the race

Jun 20, 2008 Business Daily, Strategy

“Of the 500 companies that appeared on the first (Fortune 500) list, in 1955, only 71 have a place on the list today. Nearly 2,000 companies have appeared on the list since its inception, and most are long gone from it. Dozens of companies on this year’s list did not even exist in 1955. Some of the most celebrated companies in history no longer even appear on the 500, having fallen from great to good to gone from the list…”

Jim Collins, Fortune (May 5, 2008)

Jim Collins, famed author of Built to Last and Good to Great, wrote a very important piece for Fortune magazine’s special ‘Fortune 500′ issue recently. The article tried to solve the mystery of why so many companies don’t last – and to learn the lessons from those that do.

The facts in the excerpt have a grim message: corporations, no matter how great, do not last. The Fortune 500 list displays tremendous churn, and has few long-lived members. And the churn continues today. As Collins points out in his article, Bear Stearns disappeared in a weekend, after more than 8 decades of growth. Citigroup was founded in the same year that Napoleon marched to Moscow, but is now reeling from the severe aftershocks of the American ‘sub-prime’ fiasco. And Henry Ford’s famous company faces an uncertain future as a global automobile manufacturer.

But Collins asks us not to view the data with just one lens. A different story can also be told. Procter & Gamble, founded as a little soap-and-candle company before the American Civil War, still stands proud on the Fortune 500. Johnson & Johnson has had 45 straight years of increasing its dividend. GE was in the top 10 in 1955, and is in the top 10 today.

So what do we learn? In Collins’ words: “Whether you prevail or fail, endure or die, whether you make it onto the Fortune 500, and whether you stay there, depends more on what you do to yourself than on what the world does to you.”

Hear, hear. Business is a tough game, and few can stay in the race. Products change, markets saturate, consumers mature, new technology blows away the old ways. Churn is an essential part of corporate life. I can still remember when Uchumi was the dominant supermarket, when British Leyland supplied all the trucks, when the car of choice was a Ford Escort or a Peugeot 504, when Marino’s and Mandarin were the top restaurants. For one reason or another, these institutions are more in our past than our future.

And yet, Barclays has been our top bank since before I was born; the Tamarind group seems to stand strong; the Nation is still the leading newspaper; and the best pencils are still Staedtlers! So some people do get it right: an early demise is not written on any company’s gene map. As Collins points out, there is no reason whatsoever “to surrender to the forces of mediocrity and succumb to irrelevance.” Most great institutions do fall – that is undeniable – but yours need not be one of them. A driving purpose, great values and an agile strategy can still keep your company great.