“It is not the strongest or the most intelligent who will survive but those who can best manage change.”
- Charles Darwin
Have you ever heard this famous saying? Today’s story is about company longevity and change to survive.
According to the article written by Gittleson, the average longevity of S&P 500 companies decreased from 67 years in 1920s into 15 years today. It is predicted that in 2020 three forth of S&P 500 companies will replace into companies that we have never heard. Does these fact and prediction show that a new company can only adapt to changes of the business environment? However, the situation in the world is different from the USA.
Where do you think that the oldest company that now runs in the world is? According to Economist, the company is Kongo Gumi in Japan that was founded in 587. It is more than 1,400 years old. Gittleson says that there are many long lifespan companies in Japan. In Japan, there are more than 20,000 companies that were founded more than 100 years ago and a few that were founded more than 1,000 years ago. Gittleson says about the reason of this long lifespan that since many of the companies are run by a family, they do not tend to merge with and perchance another company loosing their name. Gittleson mentions that that is because they focus on not profit but a central belief and credo that the companies have as their culture.
Rubber boots of Nokia (Souce: http://nokianjalkineet.fi/en/)
However, can a company survive just to protect a central belief and credo? Gittleson shows Nokia as the example of the survival way by changing a business domain. Nokia started as a paper company. Then it produced rubber boots. Nowadays, it is the world electronic maker. To change like Nokia, innovation is necessary. So research and development from the long-term point of view is needed. However, since investors require short-term profit, Research and development is needed to be a delicate balance between long-term and short-term points of view. According to the Gittleson’s article, DuPon implemented the new rule that it makes thirty percent of its profit from innovation that it develops in the last four years.
The article of Gittleson describes that the Japanese old companies can survive because they protect the culture and a family run business. However, I think that because of family business, they can invest research and development from long-term point of view without the hindrance of investors. Thus, they can adapt business environmental change and survive. I think that an old company has a potential ability to create innovation constantly. Do you think that an old company has such ability?
Economist. (2004, December 16). The business of survival. Retrieved from http://www.economist.com/node/3490684
Gittleson, K. (2012, January 19). Can a company live forever?. Retrieved from http://www.bbc.co.uk/news/business-16611040