How NOT to kill the company.
Tupperware, the loss-making 78-year-old American plastic food container brand, filed for bankruptcy last month and is on the hunt for new owners.
Cause of death: An outdated distribution model, a generic product made of plastic that premium customers are avoiding and massively rising supply chain costs.
The obituary in the New York Times said, "They were perfectly poised to take their absolutely stellar brand name and expand into everything domestic, the way Martha Stewart sells everything domestic. And I think they'd still be alive if they'd done that. But they stuck to plastic containers, and that was a mistake, because then suddenly there were cheap knockoffs in every drugstore and grocery store."
In June 2022, Revlon, a make-up staple for generations filed for bankruptcy.
Cause of death: Enormous debt and competition from new generations of cosmetic brands. Pandemic-related shutdowns and supply chain snarls tipped it over the edge.
The obituary in the New York Times said, “The makeup that shoppers now flock to buy looks different. In the past several years, lines from big names like Rihanna and Kylie Jenner have emerged and reached fans directly. Social media superstars have promoted those products to their millions of Instagram and TikTok followers, embracing inclusive colour palettes and sidestepping the drugstores that Revlon traditionally relied on to sell its products.”
In recent years, storied names like Bed Bath and Beyond, Hertz, and JC Penney, among others have filed for bankruptcy.
Why do companies die?
The reasons can be both internal and external.
Internal: insufficient resources, inability to focus, culture of risk aversion, organisational complexity, weak business plans, and missing capabilities. External: lack of demand, severe competition, relentless pricing pressure, and shifts in the business environment. And then there is timing, a factor we often overlook.
Companies are dying faster than ever before as the rate of change in the business world increases.
Between 2000 and 2015, 52% of the Fortune 500 were merged or acquired, went bankrupt, or fell off the list.
In 2018, the average tenure of a company in the S&P 500 was 24 years – it was 61 years in 1958. At this current rate, research predicts 50% of the S&P 500 will be replaced within the next 10 years. Maybe sooner.
Traditionally, companies have defined the business they are in by their flagship product (e.g. a soft drink company), their enabling technology (e.g. a motor vehicle company), their competitive category (e.g. a telecommunications company), or their business or distribution model (e.g. a luxury goods retailer).
Traditional definitions of a business limit an organization’s ability to predict or adapt to external change. These definitions are often tied to static views of industries, business models, culture, and technologies. They can also contribute to a failure of vision, as they don’t provide a clear north star for action.
Forewarned is forearmed: How to see it coming
The key job of a business leader is to ensure that his or her organization is not only competitive now, but remains competitive in the future. You make plans today to improve your position tomorrow.
Visualizing how things could realistically develop in your landscape is not a meaningless exercise: it’s a vital necessity.
A useful exercise I run with leadership teams is what I like to call, KILL THE COMPANY.
It involves posing the following questions: Imagine the company's demise. What killed us? Was it slow and painful or quick and sudden? Was it caused by external factors or internal afflictions? What would the obituary say?
It initially elicits gasps of horror, but invariably leads everyone to a more interesting space. It involves admitting that things within a business are far from rosy, dredging up a heap of issues and being brutally, painfully honest.
By the end of it, leaders are left with a clearer sense of the forces they need to pay attention to and what they need to do to take meaningful action.
The key to thriving, not just surviving
If leaders don’t make time to pause, reflect, and really enquire about what they’re doing and why, they risk losing perspective and focusing on the wrong things.
Unfortunately, many of our work cultures teach us to answer questions not to challenge or reframe them.
Yet it’s curiosity-driven exploration—the kind that begins with asking daring questions that open up tomorrow’s possibilities.
There are plenty of examples of large firms making multiple reinventions within 20 years and flatly contradicting the notion that only startups can lead disruption.
How do they do it? Without being crushed by internal politics, conscious neglect, and all the other manifestations of corporate antibodies that typically kill innovation?
They focus on opportunities not ideas. They test their assumptions by implementing methodology and metrics from the start and executive decision makers own their responsibility to incubate growth.
This isn't just nice to do. It’s do or die.
A version of this article was published in the ET BrandEquity on 14th October 2024.
