In 2018, Jeff Bezos told Amazon employees at an all hands meeting in Seattle “I predict one day Amazon will fail. Amazon will go bankrupt. If you look at large companies, their lifespans tend to be 30-plus years, not a hundred-plus years.”
In a 60 Minute interview in 2019 he said “I don’t worry about it because I know it’s inevitable. Companies come and go, and the companies that are the shiniest and most important of any era — you wait a few decades and they’re gone.”
The Law of Hardening Arteries
This holds true in the business world and I call it the “law of hardening arteries.” As companies grow, they reach a point where the preservation of the status quo becomes more important than innovation. In a world where things are changing at an accelerated rate it is not hard to understand why the life expectancy of existing companies is shrinking.
The company killer is its creeping bureaucracy. The larger the company the more time and expense are involved in activities unrelated to growth and innovation. HR management, communication, coordination, and bureaucratic turf wars replace the lean and mean orientation companies had in their infancy. Profit growth which is seen by Wall Street as a key sign of corporate health is, on another level, a virus which can eventually weaken innovation and shorten company life expectancy.
This phenomenon reminds me of a great quote from the movie “Wall Street” where Gordon Gekko says, “Teldar Paper has 33 different vice presidents each earning over $200,000 per year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost $110 million last year, and I’ll bet half of it was spent on all the paperwork going back and forth between all these vice presidents.”
The bottom line is that as companies get bigger (which is supposed to be a good thing), the challenges keeping that company continuously profitable grow as well. Expenses on things like bureaucratic paper pushing should be cauterized before the company bleeds out.
Where is your company on the company growth/decay path? Do you know where on that path the point of maximum exit value is for your company, and what you have to do to ensure the realization of that value?
If not, book a call with me here and we’ll address how to get your business back on track and innovating.