As our 18th birthday approaches, some folks look surprised when I state that we are going to create a 250 year legacy at Transaction Focus.
This may be because it is unusual these days for company directors to take a long term business view; most directors in the Western business world focus readily on a retirement goal or exit date, as the norm.
Both McKinsey and Simon Sinek (in his book The Infinite Game) point out that the average lifespan of a S&P 500 Company has dropped from an average of 61 years in the 1950’s to 18 years today.
This is a huge and significant decrease :-
Intense global competition, Consolidation, investment community and Director greed are clearly contributing factors.
After 9/11, we were all required to report on a quarterly rather than annual basis, as the World became a less secure place. A Shorter term view ensued.
In the 1990’s, triple line index and CSR reporting was brushed aside in favour of shorter term shareholder returns.
FTSE, NYSE and NASDAQ quoted companies increasingly sell partial shares or break off divisions of national household companies for short or medium term financial gains. In Scandinavia, France and Germany, this is less common place.
Few companies focus enough on creating a deep, meaningful culture that inspires future generations who are increasingly purpose and impact driven.
More flexible, innovative collaborative and co-operative shareholder models are appearing, albeit less investor friendly !!
Some even suggest that the traditional shareholder model created by Kodak in 1921 is broken.
Management buyouts are growing. Talent acquisition is more time consuming and costly since the Covid induced “Great Resignation”, hence new innovative remuneration approaches are required.
Although start ups are arguably leading the way with a keener focus on purpose driven missions, sadly only 5-10% of European start ups survive more than 5 years. Only 10% of this 5-10% survive another 5 years according to Hiscox business insurers. The Start Up sector of the economy is far more precarious and less glamorous than politicians or the media make out.
Black Swan events (i.e. Covid-19 and the Ukraine War) seem to be coming along more frequently, so this start up rate of survival does not look like improving.
Fortunately, family companies buck the trend as generational custodians arguably have a greater responsibility to safeguard the family legacy and crown jewels and hence opt for more cautious long term strategies.
Japan also bucks the trend : According to Statista, five of the oldest companies Worldwide are Japanese and nine out of twenty oldest companies still in existence today are Japanese.
As a student of Japanese long term Corporate business modelling this comes as no surprise.
Maybe now is the time to focus on Sustainable Sustained growth as COP 26 and COP 27 ESG initiatives become common place in larger and medium sized enterprises.