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This group is at risk in the future.  The risk is about meeting interest payments coming due.

The zombie company list includes large and small companies.

Take a look.

https://apnews.com/article/zombie-business-corporate-debt-investing-interest-borrowing-d58231b7938dd23775869ad23ccd7705

Is your career, past experiences, accomplishments, education and previous employment ready to stand up to the test of corporate scrutiny, layoffs, algorithms, AI, volatility of the stock market and the overall domestic and global economy?

Time will tell but more and more companies are announcing layoffs in 2024 – Google, Citigroup, Amazon, Twitch, Nike, Intel, Black Rock and more.

Commercial Chapter 11 filings in 2023 were up 72% over 2022.  From 2019 to 2023, there were over 25,900 Commercial Chapter 11 filings.  The year 2024 is expected to continue at 2023 levels.

The analysis about the economy, interest rate, inflation and overall business climate is frankly confusing with one opinion this and another that.  It is an election year, that will contribute to the mixed messages.  However, recession is being presented more and more as under way since 2023 and the economy is about to take a major downturn in March 2024.

Unfortunately, the Chapter 11 companies, their existing business was not built to last.  Now, individuals need to ask if their careers are built to last.

 

All the best on your journey.

Various media outlets present mixed perspectives on the American economy.  One perspective that I reviewed and accept, the stock market is not the American economy and vice versa.  In media, there are multiple speculations on – interest rates, inflation, GDP and other economic information.  However, there are also economic and business-related facts that should not be ignored.

In 2023, commercial Chapter 11 filings increased 72% from 2022.  The increase in filings is expected to continue into 2024.  This expectation is for commercial as well as personal filings.  This is due to several factors.  The commercial filings include large and smaller businesses.  Source: here.

How about your company’s existing business, is its financial as well as operational performance strong enough to fund the company’s current and future needs?  Is the company investing in the existing business as well as innovation?  Is the existing business built to last?  Does your company have a practice of innovation?  If you want to understand the answer to these questions, request our survey.  Contact us through the website here.

2023 bankruptcy filings’ current pace could push the total for 2023 past the total for 2020.  The year 2023 year-to-date filings exceeds the filings in 2021 and 2022.  The year 2023 would be the worse year since 2010 at the current pace.  See the details here.

Business as usual and the ability for leaders to change direction isn’t working for some.

Where is business as usual not the model?  Space exploration has been around since the 1960’s.  Now, SpaceX has changed the business model completely.  Space exploration is rocket science and SpaceX is leading the way.

Your company’s business model – if it is business as usual, will your company survive?  Are changes necessary?

The road forward considering political, economic (interest and inflation), social, wars and labor unrest conditions are contributing to business challenges.

There are opportunities to discover that can contribute to your business.  Does your company have structured opportunity reviews like it does operational reviews?  There are opportunities out there.

All the best for your existing business and innovation journey to be built to last.

Layoffs and restructuring continue to add up for employers through August 2023.  Since January 1, 2023, nearly 3,000 companies have announced mass layoffs.  Source is here.

Is your employer’s existing business strong enough to improve year-over-year in order to fund current operations, allocate some profit back into the existing business, fund the innovation program and provide value to shareholders?

Is your company’s innovation program realizing results?  Are products or services developing through the process – identification, test, pilot, scale, commercialization and ultimately contributing to revenue and profits for the existing business’ future?

Your company’s products or services require updates, new/improved or incremental innovation to remain viable in the market.  The Incremental area of innovation allocation of resources needs to be about 70% of the total dollars.  The second innovation area, Breakthrough, needs to be about 20% of the total innovation dollars.  The innovation in this area is new to the company but not new to the world.  As is the case for all investment – this area of innovation and all areas of innovation needs accountability, measurable results, product/service ideas moving through the innovation process to generate revenue and profit for the existing business’ future.  The final innovation area, Transformational, requires only 10% of the total innovation dollars.  Transformational innovation is innovation new to the world.

Where do ideas come from for innovation?  Your company’s leadership reviews operations on a regular basis.  Why?  This review identifies, discusses and sets execution plans in order to improve performance.  Is your company’s leadership reviewing opportunities to fill the funnel for innovation with ideas and what’s next?

You can answer all these questions.

One example is about a company that began a new industry in the US back in the 1980’s.  Since the 1980’s this new industry has grown to over $13 billion in 2021 with a compound annual growth rate of over 20% expected for 2022 to 2030.  This company through June 2023 had over a 13% sales decline to June 2022.

The overall financial results for this company since 2004 to Q2 2023 are:

• Revenues exceed $7.8 billion
• Operating loss nearly $1 billion
• Net Income loss of over $663 million
• Stock performance
  • $3.83 January 1, 2004
  • $77.73 January 1, 2014
  • Current price around $5.25 or 93% decline from the high

These results are not about an existing business and innovation combination model positioned for the future.  The company has spent over $800 million in R&D.  This is about an existing business that is in decline and possibly headed toward irrelevancy.

If you want to see the combination of an existing business and innovation model at work, consider Apple.  Apple began in April 1976.  Apple’s journey now covers 47 years and its success story is widely known.  Its innovation across multiple products has influenced buyers all over the world.  Apple nears its 50^th birthday, will it continue its journey with innovative products and services that buyers want?  Will Apple’s existing business continue to improve year-over-year, allocate profit back into the existing business, fund the company’s innovation program and provide value to their shareholders?  Will Apple remain on this path of built to last that other companies in the US began in the 1800’s?  Time will tell.

Another example of the combination of an existing business and innovation model, consider IBM.  IBM began in 1911.  IBM is now 112 years old.  It has introduced products and services through the years that corporate and individuals purchased all over the world.  IBM was included in the original built to last list by Jim Collins.  Jim Collins documented his research in his book, Built to Last.  IBM continues its investment in innovation with its development of AI.  Will IBM’s existing business continue to improve year-over-year, allocate profit back into the existing business, fund the company’s innovation program and provide value to their shareholders?  Will IBM remain on the built to last path that other companies in the US began in the 1800’s?  Time will tell.

A successful combination of the existing business and innovation is dependent on leadership, mindset, culture, organization structure, financial support and others.

Does your company have it?

 

All the best on your journey.

It maybe an indication if your company is built to last – a visionary company.

Is it – “seeing the company as a vehicle for the products/services or seeing the products/services as a vehicle for the company?” (This is from the research of Jim Collins.)  If you understand the difference between the two statements, you understand one of the foundations for a built to last journey.

Products/services need to change, meet market needs in order to support, contribute to longevity of the company.

Products/services are not the ultimate creation, it is the company.

The US Corporate bankruptcy filing hit a 12-year high in the first 2 months of 2023 at 111.   Source: here and more details.

The average business bankruptcies for the past 5 years are at 18,899 annually. The average Chapter 11 Bankruptcy Filings for the past 5 years is at 6,440.  Source: here and more details.

Chapter 11 Bankruptcy filing is referred to as, “reorganization bankruptcy.”  Businesses file Chapter 11 in order to continue operations during the period of restructuring the finances and most likely the organization.  Source: here for more details on Chapter 11.

The current economic condition in US is challenging for any business and most likely to face greater challenges.

What is the current state and for the balance of 2023 of your business now?

What is your mindset?

Even some of the 18 companies Jim Collins identified as “visionary company” – built to last are certainly under the microscope because of developments.

Now is the time to examine your company and its ability to continue in 2023, 2024 and for the next 100 to 200 years.

All the best on your journey.

A checklist to see if your company is on track to be built to last.  There is no finish line.

This checklist comes from Jim Collins’ book, Built to Last.  He identified a built to last company as a “visionary company.”

The checklist is

“Premier institution in its industry

Widely admired by knowledgeable business people

Made an indelible imprint on the world in which we live

Had multiple generations of chief executives

Been through multiple product (or service) life cycles

50-year minimum age”

 

All the best on your built to last journey.

You may remember the 16 leading economic indicators in the US from the past.  Now, with a global economy, economic indicators on a global scale are necessary for a more complete picture on the economy.

Global Economic Compass Heading

From IMF Global Reports – April 2023, baseline forecast growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023.  Advanced economies to see a steeper decline in growth from 2.7 percent in 2022 to 1.3 percent in 2023.  With further financial institution stress, global growth could decline further to 2.5 percent in 2023 with advanced economy growth falling below 1 percent.  Inflation globally continues to impact the global economy.  See the detailed report here.

A global recession continues to receive attention in various reports.  The exact month and the extent remain uncertain.  There is evidence already that a global recession is underway.  Chief economists are stating its likelihood – inflation, higher interest rates, slowing growth are all prominent factors and now financial institutions are adding to the evidence for a recession.  Source is here.

US Economic Compass Heading

The evidence is pointing toward a recession later in 2023 if not already underway.

Layoffs are mounting and expanding into various industries.  According to Bureau of Labor Statistics – “the number of job openings decreased for the third straight month in March.  The number of new hires was little changed at 6.1 million, while layoffs increased to the highest level in over two years – layoffs and discharges increase to 1.8 million.”  Source is here.  Tech companies in 2023 slashed over 170,000 jobs, March to December 2020 about 80,000 and 15,000 in 2021.  Now the layoffs are expanding to other industries.  Since January 1, 2023 over 1,431 companies announced layoffs.  In 2022, 3,150 companies announced layoffs.  Source is here.  The layoffs are due to an expected recession in 2023.

One clear indicator of a recession – transportation.  It is referred to as a “freight recession” – fewer trucks delivering goods around the country.  Source is here.

Oil production, oil price are an indicator of a coming recession.  OPEC+ reduced daily production because demand is declining and price is falling.  Source is here.

The Conference Board’s Leading Economic Index dipped again for the 12^th consecutive month.  Source is here.  What are your company’s results showing for the previous 12 months?

Overall, in US, revenues and profits are expected to be lower for the balance of the year.  Yours may be impacted or already are.  What are you doing?

Since 1982, the highest mark for odds of a downturn at 57 percent according to the NY Feds Recession Probabilities Model.  Source is here.

Your Company’s Compass Heading

Your company’s compass heading may well be reflecting the global or overall US compass heading.  This is an analysis that should be well underway.  Layoffs are well underway, across multiple industries due to expected slowdown, recession and layoffs cause stress and harm for all.

Your company’s compass heading could be pointing toward a slowdown for growth, less profits or even decline.  You should take immediate action to determine your company’s compass heading.  Once your company is on the slippery slope of decline, slowing it and turning it around is challenging.

All the best in your journey through the current economic condition.

What is the life expectancy of a company on the S&P 500 list now to 1965?

There are 49 companies on the 2022 Fortune 500 List that were on the original 1955 List or 9.8%.

In 2014 there were 61 on the original 500 list or 12.2%.  The source is here.

Where do they go – bankrupt, merged or still exist but don’t make the list because revenues dropped.  The 500 list is ranked by revenues.

As reported here, the life expectancy of a company on the S&P 500 Index in 1965 was 32 years.  In 2020 that expectancy dropped to 21 years.  The trend is expected to continue to 17 years by 2030.

Built to last companies are more difficult to find.  From the original built to last list by Jim Collins – 17 of the 18 remain.  Seven of the 18 began in the 1800’s.  What have the leaders at these companies done differently? Motorola, on the original list, operates under another name, Motorola Solutions, that succeeded Motorola from its spin off in 2011.

Is your company built to last?  Will your company’s life expectancy exceed the trend of the S&P 500?

While some see the shift in the original 500 list as a positive because market driven, the employees of the companies, shareholders, vendors might express a different opinion.  They may ask, why didn’t the leaders of my employer chart a different course?

What does it take to be built to last?  Will your company go beyond the projected life expectancy for the S&P 500 companies of 17 years by 2030?  Can you know? What actions are necessary?  A topic for a discussion – contact Innovation Advantage LLC to understand your options.

Here are the 49 companies in the 2022 Fortune 500 List that were on the 1955 List.

3M	Abbott Laboratories	Alcoa
Altria Group	Boeing	Borg Warner
Bristol-Myers Squibb	Campbell Soup	Caterpillar
Celanese	Coca-Cola	Colgate-Palmolive
Conoco Phillips	Corning	Crown Holdings
Cummins	Dana	Deere
DuPont	Eli Lilly	Exxon Mobil
General Dynamics	General Electric	General Mills
General Motors	Goodyear Tire & Rubber	Hormel Foods
International Paper	Johnson & Johnson	Kellogg
Kimberly Clark	Kraft	Lear
Lockheed Martin	Merck	NCR
Northrop Grumman	Olin	Owen Corning
Paccar	PepsiCo	Pfizer
PPG Industry	Raytheon	Rockwell Automation
Textron	Westinghouse Air Brake	Weyerhaeuser
Whirlpool