Why do some companies die while others thrive? We believe the answer boils down to how they define their business.
Companies are dying faster than ever before. Covid-19 as a Black Swan event is only accelerating it.
Between 2000 and 2015, 52% of the Fortune 500 were merged, acquired, went bankrupt, or fell off the list.
At the current rate, research predicts 50% of the S&P 500 will be replaced within the next 10 years. Maybe sooner.
Our curiosity led us to investigate why some companies die, and why others survive. We believe the answer boils down to how they define their business.
What business are you really in?
Knowing the answer is no longer ‘nice to know,' it’s do or die.
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.
The Death of Nokia
Nokia was in the business of "connecting people" but at its heart, it was a mobile hardware company. It profoundly underestimated the importance of mobile software, including the apps that run on smartphones, to the experience of using a phone.
The company, which had overtaken Motorola in 1990s as the largest mobile phone manufacturer, had lost ground to Apple's iPhone and Google android phones. In a risky move to regain marketshare in 2012, Nokia announced that it would make Windows the primary operating system.
It remained a distant third only to be merged with Microsoft a year later. In 2015, (soon after Nadella took over) Microsoft announced a $7.6 billion write-off of the Nokia acquisition and 18,000 layoffs worldwide largely from the phone business.
The Renewal of Microsoft
Future-proof companies have a different way of defining the business they are in. They define themselves based on a lasting benefit they bring to the world. A benefit that often transcends technology, business models, and even core product offerings. And they bring it to life through concrete actions.
Satya Nadella took over the reins as CEO of Microsoft in 2014 at a time when the company needed renewal. The original mission of the company, 'to put a computer on every desk and in every home' had largely been realised. But the world had changed.
Computing was no longer PC or phone - centric. It was increasingly "mobile-first and cloud-first". Which meant that Microsoft needed to evolve beyond simply building "individual productivity tools" to "reinventing productivity itself" for a world where the mobility of the human experience across all devices was what mattered.
Nadella distilled this worldview into a new purpose for Microsoft: 'to empower every person and every organisation on the planet to achieve more'. This narrative was the beginning of a transformation that would touch every employee and every part of Microsoft's business that he expands on in his book, ' Hit Refresh'. Since Satya Nadella took over, Microsoft's stock has grown more than 600% to touch over $2 trillion in market cap.
Forewarned is Forearmed
At Studio Jigsaw, we believe the key to surviving - and thriving - is for companies to define, or redefine, precisely what business they’re in, beyond the products and services they offer - and organise around it.
The rate of change in the business world is increasing. Cycles of innovation are getting shorter. Consumers are quick to evolve their needs — and quicker to abandon a brand. Competitive landscapes are changing faster: every year new companies enter the market providing appealing alternatives to the business models, customer experiences, and brand purposes of legacy companies.
Organizations need to determine a clear and generous purpose and reinvent their businesses around this lasting benefit they bring to the world. We know this unique approach drives innovation, focus, and relevance.
Want to future-proof your business? Do or Die is our modern survival-skills sprint for leadership teams seeking to drive growth and ensure longevity in this unprecedented time of disruption. Get in touch.