Monday, January 23, 2012

Long life and business

If you work in technology, or even if you don’t, it’s quite likely you saw in the news last week that Kodak (founded in 1889) filed for bankruptcy protection. A number of people seemed to be very shocked at this news and many in technology circles put it down to Kodak not embracing technology quickly enough and that their management were stupid for not making the right decisions about becoming a digital company instead of a film company.

At the same time, here in the UK, we heard of two much-loved retail businesses going under – namely Peacocks (a High Street value-fashion retailer founded in 1884) and Past Times (a 26 year old gift retailer specialising in nostalgia and retro and has a particularly good line in costume jewellery).

They may well be right to blame Kodak’s demise on technology and bad management and the demise of Peacocks and Past Times on the recession and lower spend on the High Street. It’s very easy for us to criticise, but is it fair? It got me to thinking why there’s an expectation for big businesses to live for a very long time. We don’t expect people to live forever, so why do we expect businesses to? It’s the exception, not the rule, for any large business to live beyond 50 years, let alone 100 years or more. It seems to me that both Kodak and Peacocks had a great run as both were over 100 years old.

If you read the prologue to Arie De Geus’ 1999 book, The Living Company, you’ll see that the average age of a corporation is under 50 years (you can buy the book on Amazon). And if you take a look at this list of the oldest companies in the world, I’m sure you’ll find it a fascinating read. Most of the companies seem to be Japanese or German and 89% of them have under 300 staff. I would argue that there are few in that list who were the technology vanguards of their day.

So what do I conclude from this? Firstly, that it’s hard to scale-up your business and live a long life. Also, the bigger you get, the harder it is to make drastic changes when those changes will mean many hundreds, if not thousands, will lose their livelihoods. As a manager, do you kill what seems to be a currently thriving business and a thousand happy staff for a bet on future technology that you’re not sure when will happen or that you’ll succeed at it? That’s a tough one. And just as businesses are born, so they will die and new ones will be born.

Of course, our business landscape has changed enormously with the internet and mobile technology. And will continue to do so. But these companies are still run by people – at least until the Singularity some might say – and therefore prone to errors of judgement and an inability to predict the speed of change let alone what the future may hold.

I wonder which of the new tech giants of today like Google, Amazon, Facebook, eBay, PayPal, Twitter, LinkedIn et al will make it to 50 years old, let alone 100 years old? And will they, in turn, when they reach a ripe old age, stop being able to move quickly enough to deal with the pace of change themselves?

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