The market no longer supports the same companies as in 1955 on the Fortune 500. In 2014 only 61 companies were on the list from 1955 and in 2020 only 30 companies were on the list from 1955. I have the details if you want to review. The requirements for the Fortune 500 list are based on annual revenues for the US Companies that filed their 10K. More than 1,800 American Companies have appeared on the list. Investopedia listed several reasons why companies move on and off the list: M&A, shifts in production, bankruptcies, recession. I would add the lack of innovation. Lack of innovation is a key reason for the list of company failures explained below. The key metric for the Fortune 500 list is revenues (https://www.investopedia.com/terms/f/fortune500.asp).
Markets support your company if you provide what it requires. The markets shift and now it shifts quickly. How does a company stay relevant in a market? They identify opportunities, invest in innovation to develop opportunities and deliver to the market. Innovation is one important factor that delivers what the market needs. But what is it? From Peter Drucker’s book, Innovation and Entrepreneurship, p. 30 and 31, “Innovation is the act that endows resources with a new capacity to create wealth.” “Whatever changes the wealth producing potential of already existing resources constitutes innovation.”
The existing business is important and needs to improve year-over-year. It pays the bills, employs many, generates cash flow, return to shareholders dividends, stock price appreciation and funds the future. Innovation because of investment from the existing business profits brings new products, services that the market can support to extend corporate longevity.
Two sources provide a list of 50 examples of corporations that failed to innovate ( https://inquentia.com/50-examples-of-companies-that-failed-to-innovate/ and (https://www.indiehackers.com/@Taylor_Ryan/50-examples-of-corporations-that-failed-to-innovate-8b7baa56ca). Without innovation the corporation is at risk and your career is at risk. Taylor Ryan identified a barrier in the list of 50 failed businesses. “The majority of businesses listed went out of business. They didn’t accept that to stay on top you need to take risks, adapt and open up to changing business climate.” These failures demonstrate that to stay successful corporations must continue to identify opportunities, support, sponsor, fund and innovate. However, corporations through the decades have demonstrated poor results with innovation. Why?
Corporations to be successful at innovation need the right people in the right seats, leadership, strategies and accountability. Peter Drucker expressed specifically that “the new, has to be organized separately from the old and existing.” Another specific reason for corporates and their unsuccessful innovation programs, corporations are focused on operations, efficiency, meeting customer demand, handling the day-to-day crisis that develops and ensuring operations deliver products, services on time and at a profit.
Some reasons for corporation failures from the links are:
Kodak – “management did not see the potential of digital photography. However, a Kodak engineer invented the first filmless digital camera in 1975.”
Nokia – focused on their hardware and not the use of data.
Xerox – first to invent the PC. Management decided against digital because of the expense and avoid the risk.
Yahoo – in 2005 it was the online advertising leader. Two deals escaped them because the leader was not willing to go through the process. Google in 2002 and Facebook in 2006 when Yahoo lowered its offer.
MySpace – social network leader until Facebook surfaced. Mark Zuckerberg offered to the CEO of MySpace, Facebook for $75 million. MySpace CEO, Chris DeWolfe said no.
Toshiba – a classic example of a tech giant fall and become irrelevant in 10 years.
Motorola – declined because of a lack of innovation for the small phone market, Greg Brown, CEO stated, “failure was our fault, not the economy.”
Sony – the Walkman, 1979, was the gadget for teens in the 90’s. Because Sony didn’t embrace technical innovations, digitalization and software development it missed the market opportunity. Their management reason, “company afraid to test out something new, thinking it would threaten their compatibilities on the market.”
The failure of these corporations in their own industry/market is devastating and management justified the decisions at the time. Unfortunately, the reasons are short sighted and the results painful for so many. If your company, your employer is not innovating to meet market trends, what are the reasons. You may want to compare the reasons to the ones in the link.
It is time leaders consider opportunity over risk, the future over the past, products have a limited life cycle, manage the risk, manage the innovation program for results, ensure accountability and capture market opportunities. Then possibly the company will be successful and avoid failure.
You have heard the sayings; change is inevitable or the only constant is change. This is true and innovation is inevitable or the company’s future is at risk and another company will seize the opportunity.
Phil McKinney, CEO, Cablelabs is quoted as saying, “without a robust and resilient innovation strategy, no company can survive.” At the center of a robust innovation strategy is a mindset to look for opportunities and how to bring to them to full commercialization.
A search for opportunities is a journey we are all on.
Next blog is about opportunities and finding them.