Can your company live forever? That's an interesting question. A better question is: Can your company live forever and be profitable forever? Or perhaps the best question is: Can your company live forever, be profitable forever, and grow transformationally forever? We believe it can! Alternatively, at least it can try. Is living forever the objective of your future planning activities? If not, it should be.
With the life expectancy of fewer than ten years for over 90% of newly-formed companies, an organization that can live forever seems like a ridiculous concept. However, as the leader of your company shouldn't that be your ultimate objective? If it's not, you will be subject to the typical four-stage S-curve business life cycle: launch, growth, maturity, and decline.
Breaking Traditional Business Life Cycle
Breaking this traditional four-stage life cycle requires a counter-intuitive decision by leadership—that is to invest in the radical strategic transformation of your business just at the time when your current business model is firing on all cylinders in the growth stage. Waiting until the 'peak' moment in the maturity stage is too late. Strategic transformation, disrupting your business from the inside out, ideally should take place when the company is growing like crazy. This is because at this point, the company has the financial and human resource capacity to invest in something that will not create revenue immediately and will most likely require investments of financial resources and people. Waiting until the maturity stage, or even worse the decline stage, will make this commitment much harder.
Mark Leslie, former CEO of Veritas Software and lecturer at the Stanford Graduate School of Business, termed the timing of this strategic transformation the “optionality sweet spot.” Leslie defines the “sweet spot” at the time:
- The company is out of the startup phase and no longer worrying about scare resources or traction;
- The company has achieved a measure of stability – the future looks bright, revenue is climbing, and the business model has gelled;
- The company has the money, talent, and market influence to do something new while maintaining its core business.
When companies are capable of a strategic transformation, repeatedly, they will create some generic code that will allow them to live forever.
Netflix: Success Story of Strategic Transformation
A classic example of a company that has engaged in strategic transformation is Netflix—we all know the story. Netflix started as a competitor of Blockbuster renting movie DVDs by mail (and with no late fees!) At its transformational "sweet spot", it jettisoned its DVD mail distribution business and invested in video streaming. Video streaming was in its infancy at the time and was a risky proposition. To quote Reed Hastings, CEO of Netflix, "Companies rarely die from moving too fast, but they frequently die from moving too slowly." If Netflix is an example of moving too fast, Blockbuster is an example of moving too slowly. This was Netflix’s first extension of its business life-cycle.
Netflix has continued to create strategic transformation to extend its corporate life. With the maturation of the video streaming market, Netflix has made a move to produce original movies and programming, and it redefines itself as an entertainment company. The jury is still out on this transformation move, but the financial markets seem to like it.
Mark Leslie’s “optionality sweet spot” requires both appropriate timing and strategic opportunity – the option. The development of a futures mapping process—complete with scenario development, regular and periodic environmental scanning, and active management of the futures mapping process—is the surest way of identifying strategic options. Let our team, The Flagship Futures Group, help you in creating a futures mapping process and in identifying the opportunity for strategic transformation, so your company can stay on the path of living forever.
