Sustainability, resilience, longevity: these are things that most companies strive for – but how easy are they to achieve in the modern business environment?
In the 1920s, the average lifespan of a company listed on the S&P 500 index was 67 years. Today, according to Professor Richard Foster from Yale University, it stands at just 15.
At the same time, the Family Business Institute report that only 30 percent of family businesses withstand the transition from first to second generation ownership. And by the time those businesses fall into the fourth generation of family-ownership, a mere three percent survive.
For modern businesses, the current pace of change makes it harder than ever to endure. To gain a better understanding of whether it is still possible to reach a centenary birthday in the modern corporate world, we’re taking a look at the traits that have allowed long-standing businesses to pass the test of time.
Evolve or die
The oldest public limited company in the world is Storsa Enso. The Finnish company was founded in 1288 and started life as a copper mining outfit. Today, it operates as a paper and pulp manufacturer. The example of Storsa Enso aptly illustrates that as customer’s needs evolve, to stay relevant, it’s crucial that businesses develop to meet shifting demand.
The changing face of Nintendo
Formed in 1889, Nintendo originally manufactured and sold Hanafuda playing cards. By 1966, sales of these cards had plummeted, the company’s stock value had fallen to a record low and it was in danger of going out of existence all together.
In a bid to reverse its fortunes, Nintendo entered the toy market, before moving into the video games industry in the early 1970s. The approach worked, and the company now sits on a fortune amassed by creating some of the most iconic and best-selling video games of all time.
Fast forward to today and Nintendo continues to showcase its ability to evolve – this time, diversifying with mobile games. After the launch of the hugely popular Pokemon Go in July 2016, which Nintendo partly owns the rights to, the company reached a record market capitalisation of over $32 billion.
The Failure of Kodak
On the reverse side of the same coin, Kodak is a high-profile example of a company that failed to move with the times and, as a result, paid the ultimate penalty.
Founded in 1880, over the course of the next century, the company cornered the market in commercial photography, thanks in no small part to its near monopoly on developing film. In 1996, the company posted its record revenue and in 1999, its record profits.
However, as Kodak found out, conquering your market doesn’t automatically entitle you to keep hold of it. Ultimately, focusing on film (its core product) instead of the value its customers enjoyed from that product (the ability to take photos) proved to be its undoing.
Consequently, when digital replaced film as the most popular technology for capturing images by the turn of the millennium, the camera company’s failure to respond sent it into a spiral of decline from which it never recovered.
Investment in employees
IBM recently celebrated its 100th anniversary, so it’s safe to say it knows a thing or two about staying in business for the long haul. In a recent study into the value of training, the technology giant discovered that in the best performing companies, 84 percent of employees received the training they needed, compared to only 16 percent in those performing the worst.
People are key to any business. As such, investing in their success should be a priority for any company looking to avoid joining the ever growing corporate graveyard.
The Toyota way
In 2001, over six decades after its foundation, Toyota created an ideology that now shapes its entire approach to manufacturing cars. Dubbed ‘The Toyota Way’, the philosophy is primarily based on two key values: continuous improvement and respect for people.
Toyota instils these values within its employees by making each and every one of them feel fundamental to the company’s collective cause. Although the manufacturer retains a central managerial system, this means every employee within the company is encouraged to offer feedback.
From the factory floor to agents in the field, Toyota gathers ideas from every area of the business. Employees are free to challenge their bosses, highlight issues and offer solutions via an in-house ideas scheme called the Toyota Creative Idea and Suggestion System (TCISS).
In 2011, the number of creative ideas submitted to TCISS reached 40 million. With so many ideas feeding into Toyota’s commitment to continual improvement, the company has earned a world-renowned reputation for producing some of the most reliable products in its industry.
Adopting a customer-driven approach
No company stays in business without listening to its customers. However, to build a business around what your customers want, you have to find a way of understanding them. For this reason, an increasing number of businesses are incorporating innovative methods of collecting feedback to deliver improved customer-driven approaches.
Founded in Denmark in 1932, LEGO recently became the biggest toy manufacturer in the world. Yet a little over ten years ago the business was on the brink of filing for bankruptcy. So, what the biggest factor in this remarkable turnaround? That’s right, you guessed it, placing a significant responsibility for the brand’s creative direction into the hands of its fans.
LEGO Ideas is a clear reflection of this customer-driven approach. Essentially acting as an online community, LEGO Ideas is a portal that allows fans to submit their own designs for new toy sets. If a concept earns over 10,000 community votes, the Danish toy giant promises to review the idea with the intention of deciding whether it gets manufactured and sold across the world.
If an idea goes into production, the creator earns a percentage of the sales and gets recognition as the designer on all packaging and marketing materials. But, best of all, the approach ensures that LEGO simultaneously celebrates its fans while creating products it knows there is already a demand for.
Any company that is hoping to stand the test of time can do a lot worse than heeding lessons from those businesses that have already led a long and prosperous existence. And as the real-world examples outlined above illustrate, learning to adapt with the times, investing in employees and listening to customers are all approaches that can help businesses achieve longevity.
To find out more about how your business can reach out to its customers, you can download the free ebook, Making Customer Engagement a Winning Strategy.