Jeff Bezos, the richest man in the world and the founder of Amazon, recently predicted to a group of employees that “Amazon will go bankrupt.” He was reflecting on the recent bankruptcy of Sears, which not that long ago was as formidable as Amazon is today. “If you look at large companies,” he said, “their lifespans tend to be 30-plus years, not a hundred-plus years.”
I know what you’re thinking: That doesn’t seem right. Large companies have enduring strength. Massive corporations such as those in the Dow Jones Industrial Average (DJIA) are cornerstones of our economy. We don’t think of them in terms of life expectancy; instead, we imagine them as permanent. After all, companies like American Cotton Oil, Distilling & Cattle Feeding, National Lead, and Tennessee Coal and Iron will live forever!
All those firms — long gone — were members of the original 1896 DJIA. In fact, of the 1988 DJIA — only 30 years ago — 18 of 30 companies have been dropped. All 18 either play a much-reduced role in our economy (e.g., Kodak) or are gone altogether (e.g., Bethlehem Steel).
Maybe there is something to Bezos’ 30-year prediction about large companies.
The expected lifespans of small companies are even more problematic. Statistics vary, but my experience is that if a small business survives its first five years (and only about half do), it’s likely to continue for another fifteen or so.
In other words, a single generation.
A generation of mere survival—not prosperity—is a gloomy prospect indeed. I’ve worked at a company that was barely surviving, far from thriving, and I can’t recommend it. It’s frustrating, stressful, and … well … just no fun. Avoid it like the plague.
According to Bezos, the goal is to delay the inevitable by obsessing over customers instead of worrying about the company. Not bad, as advice goes, but probably not enough. I’d argue that in addition to customers, you also need to obsess about your competitive landscape, about new technologies impacting your business, about the stability of your banking relationships, and a host of other issues.
The trick is doing all that at once.
Here’s an interesting approach: In Thomas Friedman’s excellent book Thank You for Being Late, he mentions Olin College of Engineering in Massachusetts, where “nearly everything has an expiration date.” Every seven years, the institution is required by its by-laws to reconsider everything it does — departments, curriculum, by-laws, everything — and decide whether to maintain, change, or eliminate each. Conceivably, at the end of a seven-year review, the college could decide to close its doors. But more likely, by adhering to a rigorous discipline of constantly examining its place in the world, and by adjusting to changing times, it will prosper for years to come.
What about your business? How long has it been since you really thought about what enables your company to exist, its value proposition for customers, the effects of changing markets and technology? Last year? Seven years? 30 (yikes)?
More importantly: What are you going to do about it?
Early in his career, Alec Pendleton took control of a small, struggling manufacturing company in Akron, Ohio, and sold off the unprofitable divisions and rebuilt the factory, quadrupling sales in seven years. He has been CEO of Summit Tool Company for 34 years, and is the author of the blog Big Ideas for Small Companies, powered by the MPI Group.