Thriving in the face of change
Over the last fifty years, the average time that a company has stayed in the S&P 500 Index has fallen from over 40 years, to less than 20. And the analysis suggests that over the next ten years, it will drop further, to just 15 years.
Market-leading companies are declining and being replaced by new insurgent businesses at an ever-increasing rate. But some companies are bucking the trend and thriving in their long-term leadership. Companies like Proctor & Gamble, Johnson & Johnson, and a resurgent IBM.
What sets these businesses apart is their ability to continually improve, to innovate, and in some cases, to reinvent themselves entirely, as their markets, technologies, and customers’ lives change.
These “thriving leaders” do this by focusing relentlessly on two core disciplines: innovating and exiting.
It's those two disciplines that underpin their strategic agility, enabling them to rapidly and regularly move their focus and resources between products and markets to keep them on top. It means continually developing new businesses ideas, for sure, but equally importantly, it means continually exiting areas that have a less than rosy future. And it’s that second part that so many organisations miss, but is so critical to long term success.
P&G and J&J both regularly sell off brands in markets that are no longer strategically attractive, and while IBM migrates its proposition more steadily, ‘exit’ remains an integral part of its strategy. One of the reasons Serco has been so successful in the UK public sector market, is its unapologetic approach to exiting services and closing whole divisions before they become unprofitable.
Retaining these businesses in the hope of turning them around simply drains management time and resources, dragging the organisation back from the future path it needs to take. Thriving leaders know this. They let go so they can grow.
So how do you score on strategic agility? Is your strategy clear about new business areas you intend to develop, and equally clear on those you intend to leave behind? How good are you at making those decisions, and how strong is your track record in executing them?
Bottom Line: Peter Drucker once said “The essence of strategy is deciding what not to do.” Which parts of your business do you need to let go, in order to grow?
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