It was just over a year ago when researchers at the Babson Olin School of Business predicted that 40% of today’s Fortune 500 companies would be gone in the next 10 years. Let’s explore their findings and then look at the reality of how these Fortune 500 businesses are fighting back.
Richard Foster from Yale University estimated that a Fortune 500 company in the 1920’s had an average lifespan of 67 years, today that lifespan has been reduced to just 15 years. And yet companies like YouTube went from start-up to US$1.4 billion Google acquisition within 18 months. Uber only started operations in March 2009 and is already valued at US$50 billion. Seven-year-old Airbnb is now valued at US$20 billion, second only to the Hilton Group of Hotels at US$23-billion and yet it doesn’t own a single hotel room. The speed with which things now change has led to researchers at the US’s Babson Olin School of Business, to predict that 40% of today’s Fortune 500 companies will be gone within the next 10 years.1
Firstly, why are these large companies struggling to stay relevant for longer than 15 years? Why is it predicted that almost half, will no longer exist in 10 years from now? The answer is that these Fortune 500 companies are just too large to change quickly enough to meet the rapid changes in consumer demand. Is it the Silo Effect, or is it a cultural issue? Either way, they have been out-smarted and out-paced by smaller start-up companies. So are these enormous companies just going to roll over and play dead, giving way to these start-ups that are seemingly more responsive to customer need? Surely we all know the answer to that!
I recently met with an IT Director of one of the worlds largest technology companies, and I found what he had to say almost intimidating. Most if not all of these Fortune 500 companies have embedded Design Thinking hubs into the heart of their organisations. They are able to generate customer-centric prototypes by the hundreds every month and if that isn’t scary enough, they are able to test their initiatives within 24 hours. It literally takes them one day to realise the potential of a customer-centric initiative.
The one thing I struggled with as a creator of brands, was how on earth can you test hundreds of initiatives every month without eroding the integrity of the brand. What I discovered is that they don’t. New brand identities are created. This enables these customer-centric initiatives to be tested through lean prototypes to vast digital audiences without any harm to the actual brand that empowers them.
So I believe it will work something like this. Create hundreds of initiatives every month, develop the prototypes and test them. Further develop the initiatives that are effectively servicing a customer need and then, be perceived by your audience to acquire these initiatives as part of the companies acquisition portfolio, or simply choose to run these initiatives as independent stand-alone businesses. Therefore these large organisations are going to become ecosystems of ‘customer-centric, needs-focused’ initiatives, driven by the insights through lean start-up/prototype design thinking. What we need to remember is that these initiatives are 100% digital.
So let’s try and relate this knowledge to our own businesses and ask ourselves some tough questions;
- How are we going to compete if they enter our industries and attempt to erode our market-share?
- What do we need to do to avoid being disrupted by these customer-focused initiatives?
- Are our clients happy enough with our services and the value we offer to remain loyal customers?
Let’s just imagine for a second, that your customers weren’t 100% happy with their experience of your business. Would they tell you? You’d hope so, but typically a business hears from 4% of it’s dissatisfied, digital customers. The other 96% don’t voice their complaints. A staggering 91% of these customers never come back,2 yet despite the modern customers’ preference for digital engagement, many businesses have still neglected to address their customers changing needs and their love for digital experiences.
According to my business partner Brent Wilson, the Strategic Director at Spire Digital, you need to start by developing a comprehensive digital strategy.
“A digital strategy is essentially the brains and vision behind your customer engagement efforts, which of course requires a thorough understanding of your customers needs and aspirations. You have to ascertain their goals, what they’re trying to achieve and ultimately how digital can help to make their life easier and more enjoyable. There’s no doubt that customers love digital because it’s fast, convenient and connected, but they’re just as likely to hate it, if it’s not geared to their exact needs.”
Prototyping initiatives and constantly evolving as businesses is now seen as an imperative to keep up with consumer demand, but it’s also the key to just staying relevant to customer need. For more information on how to stay relevant to customer needs, prototyping and improving your customer’s experience, don’t hesitate to get in touch to discuss how to maintain an undisrupted business for years to come.
2 Source: “Understanding Customers” by Ruby Newell-Legner