History tells us that the likelihood of most companies surviving much beyond the founder’s involvement is slim. Many get bought, absorbed into other companies or simply fail. In fact, according to John Elkann at Fiat, only 49 companies per million last beyond 100 years.
There are anomalies: the oldest company in continuous existence is thought to be Japanese and to date back to the 8th century. It’s currently run by the 52nd generation of the same family. There aren’t many owners with that kind of recorded ambition.
Unicorns, like Amazon, are big news today, but even they could fail to thrive once the founder is no longer involved. Jeff Bezos runs Amazon. Larry Page and Sergei Brin still run Google. Howard Shultz is at Starbucks. Mark Zuckerberg sits at the top of Facebook. Yvon Chouinard runs Patagonia. If they move on, then what?
Put into context, what’s your gut feeling about Uber and AirBnB lasting longer than their unicorn status? In fact, what do you think about Microsoft when Bill Gates moves right away from the business? Tim Cook is doing OK at Apple, and it’s possible they could pull that trick again, but the odds are stacked against.
I’ve written about the need for established companies to consider their consumers more actively: i.e. to put innovation at their core. The natural alternative to innovation is to respond to competitive threat. This is becoming normal practice: identify a new idea and try to buy it before the next guy snaps it up. Alternatively, see competition and move to defend the market position.
These ‘norms’ aren’t the reason why owners who started a company with a passion will take risks to protect and grow their baby. They’ve probably already put the family silver on the line and done battle with their spouses over what’s reasonable to get them where they are.
In his podcast, Masters of Scale, Reid Hoffman says that Silicon Valley investors much prefer to put money into businesses where the CEO is the founder and has been in the big chair from day one.
He goes on to suggest that, whereas longer established companies can’t bring themselves to put decision-making responsibility into the hands of one person, owner-operators won’t shy away from the big decision. If something needs doing to protect and grow a business, an owner will step up.
This particular skill is really hard to replace. If the culture that sits around Jeff, Larry and Mark has got the company to where it is, who’s going to do that when they’re gone?
Clients tell us they know this, but it’s not popular to say as much across companies who can’t rely on their founder for direction anymore.
So, I want to hold out an olive branch. The best way to avoid a situation where only the CEO or the management team repeatedly consider big risks, is to read the signals of change early, create a planned response, and exploit the opportunity to be resurgent. Innovation managers who do this can avoid the ‘risk’ conversation altogether. If there’s a single argument that will win through in a committee room, it’s the one that presents a strategy designed around unmet consumer need. What the consumers wants, the consumer should be able to get.
Investors have always clamoured for a fast return, and VCs still think cash is king. But for the founder with an eye on a succession plan, for the CEO who sees a legacy in what they do, for the thoughtful business manager who realises their responsibility extends beyond this year’s dividend, the need for a strategy is as clear as day. Innovation is the best way to see the light.
So ignore the unicorns, and focus on being the phoenix.
Seeing it differently. Future-proofing. It’s what we do.