The saying, “Build a better mousetrap, and the world will beat a path to your door” has been attributed to Ralph Waldo Emerson for years. Mr. Emerson would likely revise his famous axiom if he were alive today. Building a great product is not enough – it must be individualized and customized in order to offer a personalized user experience. This can only be achieved when organizations embrace the digitalization of their processes. Businesses must rethink how they interact with their customers and how they operate internally if they want to remain competitive. Now and in the coming years, an organization’s survival will not depend on having a superior product delivered at a lower cost; instead, survival will depend on that enterprise’s capacity for change.
Form can be thought of as essence and content. Dynamics can be thought of as potential. What is a greater measure of perceived potential than the stock market? On the open market, an enterprise’s value is not based on what that enterprise is, but rather on what the enterprise could be. Here is a table taken from a recent white paper by Zeus Kerravala of ZK Research entitled, “Digital Transformation Ushers in a New Era of Communications” that tracks the turnover of companies on the S&P 500 Index since the late 1950s.
The chart shows that in 1960, businesses remained on the index for 50 to 60 years. By the 1980s, the speed of churn had doubled. Based on these trends, by 2025, businesses are forecast to stay on the index for only 12 years. ZK Research predicts that 75% of the S&P 500 Index will turn over in the next 10 years as digital transformation takes hold.
The lifespan of 500 largest U.S stocks (weighted by market capitalization) map up nicely with the Three Waves of Technological Disruption. There are many factors that impact markets and this is purely speculative, but the major drops seen from 1980 to 1990, and 2000 to 2010 could be the result of late technological adoption. The First Wave of Technological Disruption was the availability and development of the personal computer in the early 1980’s. We see a significant drop in the lifespan from 1980 into the 1990’s. Could this be because many of the largest companies didn’t effectively incorporate this instrumental technological development into their systems, while emerging companies managed to do so and passed them by? The Second Wave, the development of the web in the 1990s into the 2000s, was also followed by another major drop in the average life on the S&P 500 Index. Did slow utilization play a role in this spike as well? Now we are in the midst of the Third Wave which is being defined by the leveraging of data and the streamlining of processes through automation. We should see a slight uptick in the lifespan according to the graph. It’s fair to assume that if companies that don’t keep up with these powerful tools and modernize, they won’t be around for very long. Many variables impact markets, but it is hard not to notice the waves.
Although though there are upticks in the lifespan of the major organizations, as the chart shows, the rate of change within the S&P 500 is occurring at a high frequency. These institutional changes might be because technology is continuing to develop at such a rapid pace. The increasing rate of development won’t just impact the major corporations – it will touch everyone. If your organization is slow to react, you could easily find yourself not just one wave out, but rather two or three. Pretty soon you’ll sink.
Here is a list of the 10 largest companies in the S&P 500 as of May 31, 2016:
- Johnson & Johnson
- General Electric
- Berkshire Hathaway (B shares)
- JPMorgan Chase
How many of these companies will still be on this list in 20 years?
In philosophical terms, dynamics and form are intertwined. There is no being without becoming in the world of Process Philosophy. This applies to any business or organizational process. Simply put, there is no stasis. You and, by extension, your organization can’t be too much of form or too much of dynamics. Essence and potential must work together. Consider this revised version of Ralph Waldo Emerson’s famous expression: “Build a better mousetrap, and the world will beat a path to your door… but the world won’t stick around.”
The question that you need to ask yourself regularly is how can you get your users to stay?
- Kerravala, Zeus. ZK Research. Digital Transformation Ushers in a New Era of Communications. 2017. ↵