President and CEO of Pivot International, a US-based global manufacturing, engineering, loT and product development firm.
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The statistics aren’t encouraging. Whether you look at research conducted by McKinsey & Co., Dartmouth’s School of Business, Boston Consulting Group or any number of renowned business authorities, one thing is clear: Corporate mortality rates are increasing. In 1958, the average lifespan of the S&P 500 was 61 years. Currently, it is well under 20. And if McKinsey is correct, by 2027, 75% of S&P companies will succumb to extinction.
The threat of early death brings increased urgency to how companies can avoid short- and long-term hazards and drive sustainable growth over decades. Now in our 50th year, these are questions our teams at Pivot International continually grapple with. While the answers can be complex, varied, and evolving, these four strategies stand the test of time while also helping companies remain oriented to the future.
Illuminate blind spots and expand your vision.
When it comes to seeing where things are going, leaders can too easily overestimate the accuracy of their own judgment and immunize themselves against the very challenges that hold the key to preserving their longevity. Make a point of not being the smartest one in the room. Surround yourself—inside and outside your organization—with people who have a robust track record of accurately reading the tea leaves and can illuminate potential blind spots. Such people can function as canaries in the coal mine for detecting issues before they become problems and as early alert systems for emerging opportunities. They can be essential to discerning whether a trend is merely a passing fad or an indication of a new future that holds untapped value and warrants concentrated investment.
Build loyalty into your business model.
If you look at the people, companies and institutions you trust and are loyal to, you’ll find that a loyalty program has nothing to do with it. If a loyalty program is what’s keeping you engaged, there’s a good chance that something is seriously wrong with the relationship. When you begin with a commitment to dazzling your customers, dangling a carrot no longer makes sense. Incentives and rewards are incredibly important, but if they’re not intrinsic to your business model, you’ve unwittingly put the cart before the horse.
Understand that your customers don’t want rewards. They want stellar CX and timely, solid, accessible, cost-saving solutions. If you focus on creating a seamless purchase journey and delivering real value, loyalty will naturally follow. If you put your energy into continually understanding your customers’ needs, pain points and aspirations—and innovating accordingly—your customers will have no need to look elsewhere. If you build sincere relationships of trust based on genuinely win-win foundations, loyalty will become an unspoken pact that can be the most outstanding contribution to your company’s longevity.
Have your horses in the barn.
Startups are notorious for not paying enough attention to having the right people in place to protect against the hazards inherent in the shift from scrambling to scaling. But it’s not just startups that are vulnerable. No matter the size of your company, no significant growth initiative should ever be undertaken without first investing in the human capital and infrastructure needed to support it.
Without the resources for effectively managing growth, things can quickly spiral into a crisis scenario that risks infecting your business with what amounts to an autoimmune disease. Therefore, when I assumed leadership of Pivot in 2012, my first focus was on building our business pedigree and fostering a more entrepreneurial culture. I knew that to support our aims of aggressive growth, we’d need to have our horses in the barn—and that they’d need to be thoroughbreds. Although our P&L statements didn’t seem to support the hiring of the high-level people I brought on board, this strategy was largely responsible for the successful acquisition of nine new subsidiaries within a six-year span.
Balance digital and physical investments.
One of the most interesting findings of the research conducted at Dartmouth’s School of Business was that with each decade, companies are spending less and less on physical assets and more and more on organizational capital. This isn’t surprising, given the rise of digital services that can be easily launched, distributed, and deployed. The strength of these companies is they are highly nimble. Compared to companies like Pivot, which own factories and supply chains and produce tangible products, they also tend to be acutely vulnerable to being imitated and rapidly out-innovated.
The implication is that digitally focused firms can fortify themselves for growth and increase longevity by balancing investment in digital and physical assets. Conversely, physical-asset-based companies must embrace digital evolution throughout their entire organization and rapidly upgrade legacy systems or face certain death. For us at Pivot, this has meant making extensive investments in the latest digital manufacturing technologies. It’s also meant strategically expanding our product solutions to include a diverse suite of wireless, cellular, sensor and IoT technologies to serve customers across fourteen industries and six markets.
Key aspects of corporate longevity involve a potent mix of variables related to expanding your vision, building organic loyalty, assembling winning teams, creating supportive infrastructure and taking a best-of-both-worlds approach to digital evolution. More can always be said about driving sustainable growth and avoiding hazards. These four strategies can form the bedrock on which risk management and other critical activities can be successfully conducted to fortify your company for a long and profitable future.
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