“Over the last 50 years, the average lifespan of S&P 500 companies has shrunk from around 60 years to closer to 18 years.” That's from the 2014 Harvard Business Review article “The Art of Corporate Endurance.”
“Small and medium size enterprises (SMEs) are only 60% as productive as large firms.” That statement was made at the recent Case Western Reserve University Innovation Summit by Economist Dr. Susan Helper.
“The 22% Disadvantage,” my 2004 article of that title (published by INC), summarized a National Association of Manufacturers (NAM) report on the disadvantage faced by U.S. manufacturers in global competition. The NAM study stated that tax rates, employee benefits, tort litigation, regulatory requirements and energy created that 22% disadvantage.
I doubt the 22% burden has shrunk, and my experience suggests the 60% stated by Helper is reasonable. Data abounds to support the plummeting life expectancy of businesses.
As a small to medium sized manufacturer in the U.S., you may feel the wind knocked from your sails. But playing the victim doesn’t change those facts.
Strategy, commitment, and action can. It’s time to stand up and fight.
Start by examining your business strategy.
- Do your products solve a real problem that many people care about?
- Do you have innovation and product life cycle management processes that keep your offerings relevant over time?
- Does your business model reflect changing realities?
If you answer any of those questions with “No,” government costs and automation enjoyed by your larger competitors are not your biggest problems. Address the strategic issues immediately.
Next, honestly assess your demonstrated commitment to operational excellence.
- Do you employ people capable of increasing the capabilities and productivity of your firm, or elect to hire fast and cheap? You can’t be successful alone. Surround yourself with talent.
- Do your Preventive Maintenance, onboarding, process definition, design and quality assurance processes support enhanced productivity? If there’s no time for those, there’s little time left.
If you fear any necessary systemic changes are too expensive, be honest about your options. Money is easier to find than profitable ideas and superior talent. A great product with high costs and low sporadic quality won’t last long.
Next, be quite certain that the work employees are performing is the important work consistent with your strategy and commitment to operational excellence.
- Establish clear priorities that tie to visible goals and objectives, and take action.
Some of you are currently well-positioned; realize that condition can be ephemeral, and prioritize accordingly. Others are well-positioned, and think they see the finish line. But the race never ends. Unfortunately, the majority are losing the competition, not realizing they’ve already been lapped.
Current reality is that the odds are against any specific business surviving for multiple generations, much less thriving. To overcome those odds, robust strategy, relentless commitment to relevant excellence, and decisive action are the starting blocks.
You can beat the worsening odds, but not by complaining how unfair the world is. Change it instead.