Your Company Probably Won’t Exist in 15 Years.

Ok, it’s an inflammatory title.  But there’s increasingly solid evidence that your company may not be around much longer.  Take a look at the S&P 500.  According to Professor Richard Foster from Yale University, the average lifespan of a company in the 1920’s was 67 years.  Today the average lifespan of a company on the S&P 500 has shrunk down to 15 years.  And it’s still shrinking.  Foster speculates that by 2020 three-quarters of the companies on the S&P 500 don’t even exist right now.  “But my company has been doing the same thing for over 100 years,” someone shouts.  Indeed that may be true.  But the accelerated rate of change is like a steam roller flattening the chest-thumping zealots who refuse to recognize that a new set of rules is defining the future of longevity in business.  A client recently asked me, “If I’m building a software platform for 2017 do you think our current sales model will still apply?”  The answer is inherent in the question.  No.  Nothing that currently “works” in big corporations and small businesses alike will have the same relevance in four years.  That means we all have to risk letting go of the thinking that got us this far.  Hard as it may be to accept, hyper-conservative aversions to risk will be the downfall of many big and small companies.  Business owners and leaders all need to take their feet off the brakes and learn to be more tolerant of risk.

For small businesses these statistics may not come as a complete surprise.  According to Entrepreneur Magazine 55% of small businesses in the service sector fail within four years.  Those are pretty bleak odds.  The reality is that most don’t make it.  Or if they do survive the business simply scratches out a low-net existence until the owner dies, call it quits, or shuts the doors and works for someone else.  The correlation from the S&P 500 to Small Business U.S.A isn’t that far off.  But there’s an exciting way to move forward.  Here’s a few ideas…

Flatten the org chart.  It’s pretty well accepted that command-and-control leadership is over.  Top-down leadership suffers deleterious myopia.  Flattening an organization means an owner needs to allow every member of his or her team to access and contribute to strategy decisions, customer service tactics, and growth initiatives.  My good friend Doug Sheneman and I were talking about this earlier today.  “I’m going to run my business differently next year,” he shared, “and open up our numbers, our plans, our people to a broader group of people in and out of the company.”  That’s a big step for most business owners.  Sharing numbers and sharing strategy with people from outside the company?  It’d make a lot of owners nervous.  Yet Doug’s business will benefit from a new set of informed perspectives and expertise.  His field teams will participate in planning.  His technical teams will be integrated in to the customer service side of the business.  The organization will flatten out because the owner will no longer be at the top of the pyramid while the quality of team engagement will skyrocket.  That’s a smart risk.

Focus on the Experience.  Every time I’m in front of a group of people I recommend Joe Pine’s seminal work The Experience Economy.  I’m re-reading it right now for the fourth time.  It’s still ahead of it’s time.  According to Pine (and I agree) the service industry as we know it is a dead star.  Strangely, most of the people I know in the service industry recognize this yet refuse to do anything about it.  They stubbornly hold on to the belief that service has value.  But it doesn’t.  It’s a commodity.  It’s a commodity that, because it lacks sufficient differentiation, causes downward price pressure in the market.  Experience-based businesses will provide education, escapism, entertainment, and esthetic benefits that are very hard to find in the service sector.  In other words, The Experience Economy requires that a company stage emotionally engaging events that capture the customers’ hearts.  Staging an experience in a service industry means a business owner needs to sincerely consider the “staging” and the “actors” on the stage.  That type of attitude about a service business is a risk. Incidentally, what I’m talking about is much more than a fancy truck wrap.

Innovative offerings.  Kodak began as an imaging company and died as one.  Berkshire Hathaway started as a textile mill and is not much like a textile mill any longer.  Very different outcomes eh?  The service industry has always had it’s limitations regarding product innovation simply because it purchases goods from someone else and then re-sells them.  It would seem that there are innovative limitations.  But if the goods themselves are not particularly innovative then the ways in which the products are positioned and sold must be.  Designing a company and product “brand” message that connects with consumers in a meaningful way (instead of boiler plate and stock photos) is a simple form of innovation.  Providing services that are scarce in the market is another.  I know a handful of home energy audit businesses who are finding a new niche simply because they bring something to the table that others don’t.  Integrating new products in to the sales mix is another small means of innovation.  More and more of my friends are offering Nest products in order to at least offer something that others aren’t.  Unless the service sector decides to move in to the manufacturing game the limits on product innovation are constrained.  The risk is to be the only company doing “X” while the herd sticks with “Y.”

Long-term customer influence. Unfortunately most service businesses treat customers like wood for a fire.  Grab a few logs, toss them in the flames, let them burn out, hunt for more wood.  Repeat forever.  But coals burn for a very long time when well tended.  Such is the case with amazing customer service.  In the long run any business is utterly dependent on the the very customers who are more likely to wind up in a cold database than anything else.  Staying connected to customers means a small business needs to take a few risks.  First, actually care about them (not lip service “care” but actual Care).  Second, they need to know who their very best and most influential customers are.  Finally, have honest and open ways to let them in, allow them to participate, encourage them to co-create the company itself.  Make it the norm.  Most service companies spend good money over bad replacing prematurely ended customer relationships with new, equally short-lived customer relationships.  I’m at a loss to say how this makes any sense.  Owners who risk opening up their business to a long-term and co-creative environment create a magnetism that’s hard to ignore because the customers themselves are participating in something they care about.

Stop saying “It’ll never work.”  If I had a dollar for every time a person said “You don’t know my market” I’d be a rich man.  Markets are markets generally speaking.  Although it’s egotistically comforting to think that Denver is somehow radically different from Chicago it’s just not the case.  The Wolverine preview was launched on Vine for heaven’s sake!  Do people in Seattle “get” Vine more than people in Phoenix?  The most exciting thing about doing business right now is that nobody has it all figured out, the playbook is gone, MBA’s are sitting around saying “WTF!?” and small business has never had as many awesome ways to accelerate growth as it does right this very second.  From zero-cost websites to free analytics to tablet sales software to crowd-sourced branding ideas to super cool new products to outsourcing talent to incredible CRMs…whew!  To the risk-averse I’l say “You’re right.  It’ll never work.  I don’t know your market.  Nobody does.  You live in some weird vortex like the Bermuda Triangle.”  But to the rest of you I’ll say: “It will work.  It is working.  It will continue to work.  And you have to be “ok” functioning more in the grey than in the black and white.  If you’ll take the risk to grab on to something new and accept that Risk is the new Stability.”

15 years.  That’s what it’s come down to.  A decade a half.  That’s a damn fast burning fuse.  The thing is, I want to see all my friends still in the business in the years to come.  The odds are I won’t.  That sucks.  But for the ones that do make it I know that they’re letting go of many of the things that have taken them this far and that need to be discarded.  

We all need to accept the fact that you cannot stay in one place and move forward at the same time.

 

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6 responses

  1. Awesome Matt. Very opening and clarifies what I’ve been feeling. Can’t wait to discuss this in more detail while sharing some wine on the boat. When are you visiting Phoenix?

    Bill

    Sent from my iPhone

    • Morning Bill–thanks for the note–glad you like the post. When you say “clarifies” what you’ve been feeling what feelings does that include? Maybe I can help. In terms of Phoenix, ACCA had me slated to come down then backed out because of $. They’ve verbally committed to having me back in Jan/Feb but the numbers still have to line up. Heidi and I would love to come down and veg out on the boat…we just need to find a way to make it happen.

  2. Wow, these are amazing facts. Thank you for reiterating and reinforcing some of the things we discussed last week.
    Matt, I want to personally thank you since you reignited my fire with many sparks! (I’ll tell you about it later)

    • Good morning my friend and thanks for the kind words! We all need to be aware of what’s coming and prepare ourselves now for a very exciting future. Let’s catch up. Do you have my contact info still?

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