Average Corporate Survival Rate

In the mid 1980s a study by Shell suggested that the average corporate survival rate for large companies was only about half as long as that of human being. Since then pressures on firms have increased enormously from all directions with the inevitable result that life expectancy is reduced still further. Many studies look at the changing composition of key indices and draw attention to the demise of what were often major firms and in their time key innovators. For example, Foster and Kaplan point out that of the 500 companies originally making up the standard and Poor 500 list in 1957 only 74 remained on the list through to 1997. Of the top 12 companies which made up the Dow Jones Index in 1900 only one – General Electric survives today. Even apparently robust giants like IBM, GM, or Kodak can suddenly display worrying signs of morality whilst from small firms the picture is often considerably worse since the lack the protection of a large resource base.

Some firms have had to change dramatically to stay in business. For example, a company founded in the early nineteenth century which had Wellington boots and toilet paper amongst its product range is now one of the largest and the most successful in the world in the telecommunication business. Nokia began life as a lumber company making the equipment and suppliers need to cut down forests in Finland. It moved through into paper and from these into the paperless office world of IT and from there into mobile telephones

Another mobile phone player Vodafone Air touch grew to its huge side by merging with a firm called Mannesman which , since its birth in the 1870s has been more commonly associated with the invention and production of steel tubes. Tui is the company which now owns Thomson the travel group in the UK, and is the largest European travel and tourism services company. Its origins however, lie in the mines of the old Prussia where it was established as a public sector state lead mining and smelting company.

Nor is this only problem for individual firms as Utterback’s study indicates whole industries can be Undermined and disappear as a result of radical innovations which rewrites the technical and economic rules of the game. Two worrying conclusions emerge from his work; first that many innovations which destroy the existing order originate from newcomers and outsiders to a particular industry and second that a significant number of the original players survive such transformations.

So the question is not one of whether or not to innovate but rather of how to do so successfully. What lessons can we learn from research and experience about success and failure and is there any a pattern to these which might be used to guide future action? Resource the option – providing (either by creating through R&D or acquiring through technology transfer) the knowledge resources to exploit it.

In a process as certain and complex as innovation, luck plays a part. There are cases where success comes by accident –and sometimes the benefits arising from one lucky break are enough to cover several subsequent failures. But real success lies in being able to repeat the trick to manage the process consistently so that success whilst never guaranteed is more likely. And this depends on understanding and managing the process such that little gets to chance. Research suggests that success is based on the ability to learn and repeat these behaviors it’s similar to the golfer Gary Player’s comment that the more I practice the luckier I get.