Page 159 - HBR Leader's Handbook: Make an Impact, Inspire Your Organization, and Get to the Next Level

148 HBR Leader’s Handbook

described in Built to Last as “a remarkable turnaround.” Twenty years later,
though, the company was again verging on bankruptcy due to structural
cost disadvantages, slow reactions to market shifts, and a general lack of in-
novation. Then in 2008, it was rescued and transformed once more by CEO
Alan Mulally, emerging as one of the world’s most profitable car companies.
Three years later, after Mulally’s departure, more struggles ensued as Ford’s
profits and share price began to flatten. In 2016, the board fired the succes-
sor CEO, fearing the company was not positioning itself to survive in an
industry being revolutionized by self-driving and electric vehicles.
Ford has managed to survive through these up and downs, but many
companies don’t. The average life span of an S&P 500 company has de-
creased from sixty-plus years in the 1950s to around seventeen years now.
In his HBR article “The Scary Truth about Corporate Survival,” Vijay
Govindarajan reported on research at Dartmouth that looked at the
longevity of almost 30,000 companies listed on US stock markets from
1960 to 2009 and found that companies that were listed before 1970 had
a 92 percent chance of surviving the next five years, whereas companies
that were listed from 2000 to 2009 had only 63 percent. According to the
Small Business Administration, only 50 percent of small businesses last
five years, and only 33 percent make it to a tenth anniversary. Most
researchers say that nonprofits fail at about the same rate. Similarly, ac-
cording to research by Boston investment firm Cambridge Associates, data
suggests that 60 percent to 80 percent of all startups fail after five years, a
rate somewhat higher than that of small businesses.
So why is sustained business success so ephemeral for most companies
and many leaders? Every rise-fall-rebirth-fall-again story has its own par-
ticulars, but in the end, there are always two villains in the plot.
The first is external: even after a company has successfully transformed
itself, markets will continue to shift, often suddenly; new technologies will
emerge; and global economic shocks will periodically rock the system.
When Mulally was heroically saving Ford, who could have predicted that
within a few years, the company would see the explosive success of Tesla,
the proliferation of ride-sharing transportation, or the accelerating prog-
ress of self-driving cars?