Why Established Companies Fail
In today’s world and in the era of constant and frequent changes, the business environment is now more unpredictable and volatile than ever. To survive and then thrive we need a more fundamental approach to the way we deal with issues that prevent us from being successful. We need to stay ahead of the game by not only considering how good our short-term performance is but to also be resilient and enduring. We need to question and understand how good our competitive game is in the long term and how long that ‘game’ will last.
The question is, how can a business stay ahead of the game when the average age of a company has fallen from almost 60 years old in the 1950s, to less than 20 years currently? The common dilemmas seem to be leadership failure, unprofitable business models and rapid growth and over-expansion. This list is endless and are genuine causes to failure, however, let’s think deeper and take a few steps back. Is it only companies that are dying and disappearing?
In short, no. Looking back at history we can see that there have been empires that have fallen, animals that have become extinct, dynasties that have fallen and corporations that have failed, but the real question is why and what is common in the root cause of all these failures?
What is the common root cause of all failures?
First, let us clearly define success and failure as there are many definitions for these two words. Briefly, success means achieving the desired aims and failure means the lack of success. It may sound very simple but what differentiates these two words is whether or not you can reach the desired aims. But what is the ultimate aim?
We will use nature to introduce our concept. The ultimate aim for all living beings in nature is to survive, consequently, success in nature means the continuation of life and failure means elimination and extinction. But why have some living beings survived for millions of years and some have become extinct? Charles Darwin's theory of natural selection states, “The extinction of species is closely tied to the process of natural selection”. In simple words, any living being with favourable variations are more likely to survive and if its variations are not adaptable to its environment, it will be eliminated.
Lack of ability to Adapt.
Now that we know that the way to survive and be successful in nature is to ensure the living being will adapt, the next question we must answer is, how can a living being adapt?
What is the key to adaptation?
Species’ can solve the problem of adaptation with genetic mutations, this phenomenon is inevitable. However, these changes do not mean that they will necessarily survive. Some of these changes make one species more adaptable to their environment than others. Therefore, the successful variations are the ones that make a species more adaptable to their living conditions.
This process that relies on the process of natural selection and that changes the characteristics of a species or living beings over time is called evolution. Species that evolve to adapt to the living conditions of their environment (I.e. climatic conditions of the ecosystem, predators, and other species that compete for the same food and space) are more likely to survive.
So far, we know that lack of ability to adapt is the root cause of all failures and evolution is the key to success, but how?
Can we control evolution?
We know that there are similarities and differences in living conditions of living beings. And due to dynamic nature of the environment, these living conditions are frequently changing.
Today, science is rapidly moving towards artificially altering desired characteristics of living beings and species, but to date there is no method to enable all species to adapt to their environment. On the other hand, no living being has full control over evolving, to only alter the required or desired characteristics to be fully adaptable to the living conditions of their environment.
But there is one thing that differentiates humans from the rest, that is our cognitive and intellectual ability. Over the course of history, humans have used their intellectual ability to fulfil and meet their needs to survive in nature and different environments. In other words, we use our intellectual ability to evolve and adapt.
Yes, if we use our intellect to Adapt.
How should we adapt?
Nature leaves you with two options. Either you adapt over time or you will be eliminated. Living beings are left with no chance of survival if their genetic mutations are not in a way that is needed or are not fast enough to suit their living conditions.
The same analogy can be applied in the business world. Companies are a species, market is the environment, success means continuous growth and failure means elimination. The companies that do not evolve and adapt to the market’s speed they will be eliminated. In other words, companies need to frequently evolve by intellectually adapting to their business environment.