Management Toolkit

Google and Microsoft may face extinction

Andy McCue silicon.com

Published: 11 Jun 2007 08:49 BST

Google and Microsoft could be among the famous high-tech names to disappear from the corporate landscape within the next 20 years, if a cycle of how companies die repeats itself.

A study of the profits of 3,200 of the largest companies trading publicly on the US stock exchange between 1960 and 2004 has revealed a third go out of business and a third are acquired on average 23 years into their existence.

The year-long study — carried out by Greg Hackett, Goodyear executive professor at the Kent State University business school — found that overall profits have declined by 40 percent in those 44 years to an average profitability of just 4.3 percent.

The study also shows that today 80 percent of companies are stagnating or declining and failing three-times faster than they did in 1960.

Hackett said: "Changes are coming faster and virtually no-one is immune. For most companies out there it is just plain razor thin. Everybody gets into trouble. But when you are unprofitable three out of the last five years, it's gone. Kiss it goodbye."

Based on "lifecycle signatures" of declining companies in the study, Hackett predicts some of today's biggest corporate names will disappear — either by going bust or being acquired — within the next 20 years.

Companies on Hackett's "danger" list include:

Amazon.com
Dell
Google
Microsoft
Starbucks
Wal-Mart
Yahoo

The study, sponsored by data-warehousing company Kalido, found the key reasons why companies fail include missing a major external event (such as the internet); becoming inflexible over time as they get larger; having a short-term stock-market focus and following management fads; and using outdated, static planning processes.

Some of the most "deadly" forces include globalisation, technology, customer loyalty (or the increasing lack of it) and demographic changes. Hackett said businesses will need to deal with information overload, be bold and take risks to survive today's threats.

He said: "There is no-one who stands on the roof with binoculars and looks at what's on the horizon and current trends are making it worse. Information overload equals less insight. No-one ever puts their feet up on the table and just 'thinks'. They have lost the instinct in the planning process. Get valuable information and pair it with instinct."