UPDATE: Read the Executive Summary and Download the 2016 updated report
CORPORATE LONGEVITY: TURBULENCE AHEAD FOR LARGE ORGANIZATIONS
We’re entering a stretch of accelerating change in which lifespans of big companies are getting shorter than ever, according to Innosight’s study of turnover in the S&P 500.
- The 33-year average tenure of companies on the S&P 500 in 1965 narrowed to 20 years in 1990 and is forecast to shrink to 14 years by 2026.
- Record M&A activity and the growth of startups with multi-billion dollar valuations are leading indicators that a period of relative stability is ending and that an increasing number of corporate leaders will lose control of their firm’s future.
- A storm warning to executives: at our forecasted churn rate, about half of the S&P 500 will be replaced over the next 10 years.
- In a related survey on strategic readiness, executives say that growth strategy is being undermined by day-to-day decisions inside companies and that too many companies lack a coherent vision of the future.
Read the Executive Summary and Download the 2012 updated report
CREATIVE DESTRUCTION WHIPS THROUGH CORPORATE AMERICA
Lifespans of top companies are shrinking, according to an Innosight study of the S&P 500 Index
- 61-year tenure for average firm in 1958 narrowed to 25 years in 1980—to 18 years now.
- A warning to execs: At current churn rate, 75% of the S&P 500 will be replaced by 2027.
- To survive and thrive, leaders must “create, operate and trade” their business units without losing control of their company.
- Study led by Innosight director Richard N. Foster, co-author of Creative Destruction.
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The term “creative destruction” is widely credited to the Austrian-American economist Joseph Schumpeter (1883-1950). Schumpeter studied the formation and bankruptcy of companies in Europe and the United States. He concluded that “economic progress, in capitalist society, means turmoil.” Richard Foster, in his 2001 book Creative Destruction, applied Schumpeter’s theory to the modern practices of management and innovation.
According to Foster, the life span of a corporation is determined by balancing three management imperatives: 1) running operations effectively, 2) creating new businesses which meet customer needs, and 3) shedding business that once might have been core but now no longer meet company standards for growth and return.