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Rise and Rise again

19 June 2018Jonathan Faurie

While South Africa is facing a far more optimistic economic climate in 2018, the tough economic times faced over the past two years are still stark reminders that trouble is never far away.

The true value of a company is not how they succeed in flourishing economic climates, but how they hustle and struggle to survive in tough economic climates. 

I recently read an article on www.forbes.com which discussed how companies can find this growth. The article was written by Miles D. White and profiled the journey of some of the world’s top companies during these tough times. While the article was written in 2012, some of the lessons are relevant today. 

Facebook dynamism

The Forbes article points out that Facebook's much-anticipated initial public offering highlighted the dynamism of the US economic environment and all its opportunities and challenges. 

Some 200 companies were at the time in the initial public offering pipeline in the US, nearly the most in a decade, according to the IPO tracking firm Renaissance Capital. At the same time, spinoffs and splits at public companies in 2011 were up more than 50% from the year before. 

Among those is Abbott, the company White has led since 1999, which was in the process of separating into two businesses, a diversified medical products company and a research-based pharmaceutical one. Still other longstanding enterprises, including a number of great American brands, lie in bankruptcy. 

The striking contrasts along this spectrum vividly illustrated the corporate cycle of rise and fall, and the chief challenge and imperative for any company and its CEO: sustaining the enterprise. 

Abbott began business in 1888 and was an original member of the Standard & Poor's 500 Index when it was launched in 1957. Today fewer than 80 of those then-leading companies still exist. So what will it take for Facebook—or any of the other companies now going public—to build a sustainable business enterprise that can grow and thrive into the next century? 

Key requirements

White wrote in the Forbes article that in his view, there are two key requirements to growth in tough economic times;  an ability to maintain an unrelenting focus on the future, and a determination to make difficult, sometimes transformational changes. 

At too many companies, there's little thought given to the next quarter century in the rush to meet the demands of the next quarter. Companies need to have a strong focus on anticipating change, at both the macroeconomic and industry-specific levels. 

This leads to some critical questions: How do you best position yourself to confront changes in markets, demographics, products, and technologies? What are the best investments to make now in preparation for those changes? One of the elements of successful long-term planning is understanding which changes in the business environment are fundamental, and which are just short-term storms to be weathered. 

The mighty rise

The article adds that Fujifilm saw that digital photography would one day make traditional film obsolete.

The company made early investments in digital, developed new business lines, and has succeeded in the face of disruptive change to its core business. 

Apple, originally a maker of personal computers, didn't hesitate to bring us the iPad, a computing format that has arguably cannibalized its original business. 

Its focus was on winning the future, not protecting its past. Disney has continually redefined itself, broadening its scope in the process, seeing itself as a provider of entertainment, not merely a maker of cartoons, its original business.  This approach has allowed it to continually reinvent itself and capture every new kind of opportunity that arises in its space.

 

 

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