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The business world in crisis

Written by on 27 September 2010

When people think of the world in crisis, they often think of ‘far-flung’ third world countries struggling with internal conflicts or huge environment disasters. However, some might say that our very own corporate business world is in crisis.

Charting business in volatility

A remarkable study by Cameron and Quinn (1999) investigated the Fortune 500 companies. Amazingly, they found that the number of companies that attained world domination rarely held that position for long, and the speed of change was increasing dramatic.

“Of the largest 100 companies at the beginning of the 1900s, only 16 are still in existence. During the last decade, 46% of the Fortune 500 companies have dropped off the list.” Cameron and Quinn (1999)

Half-life of companies

Cameron and Quinn’s research shows that the life of the most dominant of global players is becoming shorter and shorter. Almost by the time a company has reached the top of its financial performance, the seeds of decline have been sown.

Frogs in boiling water

Bob McDonald (CEO of P&G) describes this decline through the analogy of a frog being placed in hot water. If you place a frog in hot water, it instantaneously knows it too hot and will jump straight out of the water (and therefore save itself). However, if you place a frog in cold water and gently heat the water, the frog will gradually heat up and eventual boil to death. The key point is that organisations rarely see the threat that will eventually unhinge their dominant position.

Global context increases competition and enables organisational agility

Increasingly, companies are adopting an asymmetric competitive strategy. They look to leverage knowledge and social exchange to benefit their own organisation structure. Larger businesses are finding this new approach difficult to meet.

Organisational agility

Organisational agility can be derived in a number of ways. However, increasingly, the key to success is in the intellectual and conceptual flexibility of the organisation’s employees rather than the physical attributes of the organisation.

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