You’re either “Green and Growing” or “Ripe and Rotting.” Unfortunately most companies and even entire industries are Ripe and Rotting — they’re locked into obsolete Success Formulas and innovative companies are putting them out of business. Do you know how many of the top 500 hundred companies on the 1994 Fortune 1000 list of companies are still there today? What would you guess… 90%? 85%? Wrong. It’s about half — 55%.
That’s really amazing when you think about it. These are our biggest and most successful companies… how could this happen? What explains this? That is the question Adam and I have been trying to answer together since 1999, and that’s what this blog is dedicated to exploring.
Ripe and Rotting companies — which in our language would be companies in the “Swamp” and “Whirlpool” parts of our “River” lifecycle metaphor — cannot transform themselves because they are locked-in. They are unable to reinvent their business even when they want to, although most don’t. What they do want is to make their old Success Formula vibrant and effective again, and they do this through what we call Defend & Extend Management (D&E).
D&E management is a way of responding to marketplace challenges that enables companies to keep doing what they’ve always done; only maybe they make it better faster or cheaper. Well, it doesn’t work in today’s economy—it did 30-50 years ago when these management concepts originally became codified and eventually hardened into dogma—but not today. And that’s why so many companies are failing, and almost every company is struggling. Their basic assumptions about the economy and how to compete have become obsolete and they—and in fact the business world at large—have not made the leap to a new set of principles that does work.
That’s why the investment community tries to squash Google’s IPO instead of finding a way to transform themselves to prosper in a world where the Dutch auction is the standard for IPO’s. It’s why music companies sue their customers instead of adapting to a world where downloading individual digital songs is the norm. It’s why the major airlines cling to their hub-and-spoke business model instead of ditching it and experimenting to find a new approach where they can make some money.
Oh, and about Google’s IPO… well apparently it was successful after all. And now the media is reporting that other companies may go this route with their IPO’s (oh really??!). And the big investment companies? Their D&E response was to stay away from the IPO… and in doing so missed out on this tremendous business opportunity.
