On the 22nd of May 2010, Laszlo Hanyecz made the first real-world transaction using Bitcoin paying for two pizzas in Jacksonville, Florida, United States. His bill at the time; 10,000 BTC. In current day value of Bitcoin this would have cost him nearly $54,762,500.- (as of the 24th of April 2019). A healthier option might have been, to make himself a sandwich.
CEO Jim Hackett found himself in a wave pattern during the last decades: shrinking the company during recessions, then growing it, then shrinking it, then growing it. That’s not healthy. The business environment changes continuous, so Ford has to perform better than in 2018 and in 2020 better than in 2019. It’s extremely dynamic. It’s not enough to look at market share, profits, earnings per share versus those of other car manufacturers that count. What if Amazon starts to sell cars/car parts? You probably don’t lose to the standard competitors, but it’s the mutation coming at you that matters. Being competitive is about a lot of drivers and being ahead of the game is all about Corporate Fitness, according to Jim Hackett, CEO of Ford Motor Company.
Yes, we have new insights about the life expectancy of companies. It is based on the S&P Dow Jones Indices of the 500 leading companies in the USA. Here are the key figures about life expectancy of companies (source Innosight/FD, December 2018)
Professor Jaap Koelewijn’s quote is telling, pointing out that a number of multinationals may be reaching the end of their company life-cycle. The financial press reports that an increasing number of hedge funds put heavy pressure on those boards of management to divest and/or to split up their companies to meet shareholder value. Management’s answer throughout 2017 has typically been to make ‘unrealistic’ promises that they will somehow succeed in meeting shareholder expectations. In addition, they took the easy and relatively straightforward way forward of cost-cutting and increasing consumer prices.
Most of us recognize this ‘annually recurring ritual’ in the company planning cycle which in most cases is based on an inside view. It becomes a breeding ground for all sorts of biases that subconsciously give more weight to facts that back management’s view than inconvenient ones that don’t. Being inwardly-focused and not anticipating competitors’ moves is remarkably superficial and is another breeding ground for competitive surprises. To overcome this, management is forced to think ‘strategically’ and needs evidence-based strategic intelligence.
The potential hostile takeovers of Unilever and AkzoNobel were a wake-up call for their respective boards of management and boards of directors, providing a reason for both companies to act, however, both moved in the wrong direction, by selling-off parts of their companies, and of course via cost-cutting. Two easily-implemented actions which helped improve shareholder value. The Big Egos at the top were no doubt very proud of themselves to have made a decision. Together with my co-author, Dr. Antoinette Rijsenbilt, we described those too Big Egos in numerous cases in our 2015 book “Big Boys Big Egos and Strategic Intelligence”.
Asking the right questions is the biggest issue to challenge top management. Examples of crucial questions include: how long will our sources of competitive advantage survive in the face of technological shifts? How will changing customer and societal expectations affect our business models? What does it mean to be an international company when the benefits of international integration are under intense scrutiny?
It is interesting to analyze the research of Professor Vijay Govindarajan published in Harvard Business Review in 12/2016, which deals with some 29,700 companies listed on US stock markets. Companies listed before 1970 had a 92% chance of surviving for the next five years. However, those companies listed from 2000 to 2010 had only a 63% chance, despite the dotcom bust and the Great Recession.