Look Within

- Rajesh Pandit

Prevailing business environment has been extremely challenging for most organisations that operate in the capacity of being suppliers and service providers. Globalisation has levelled the playing field. Today’s customers are a lot more aware of the products and services they avail and the marketplace is infested with fierce competition. Technology is changing both consumer preferences and the way firms develop products and cater their services. Organisations are increasingly finding traditional hierarchical structures and policies coming short in meeting the new demands. The following three observations make a compelling case for an immediate and radical change in the way organisations are functioning presently.

Market place disruptions-average life of organisations is shrinking, and shrinking dramatically

Findings by Innosight, in its corporate longevity forecast report for 2018, are quite interesting and alarming. The average tenure of companies on the S&P 500 was 33 years in 1964. In 2016, it shrunk to 24 years and the report predicts that the tenure will shrink to just 12 years by 2027 (Chart 1).

Approximately 50 per cent of the S&P 500 will be displaced by newcomers over the next ten years, if Innosight’s predictions turn into reality.

According to a study based on Bloomberg data, only four among the top 12 companies by market cap in the year 2000 have remained in the top 12 list in 2018. General Electric, the leader among the pack in 2000, is not even a part of the present list.

Clearly, the longevity of organisations is on a decline and the rate of decline is accelerating.

Average employment tenure is also on a decline