Disruption is about risk taking. But then you become a Fortune 500 company, which Is about mitigation.
Steve Case – Entrepreneur
Let’s go back a few years. In 1962 General Motors was one of the top five U.S. companies in terms of its market capitalization. GM at the time employed 500,000 high-wage, factory workers. Now, grocery chain Kroger employs around 400,000 low-wage workers. Target employs almost 350,000 workers. These jobs have high turnover, few benefits, and relatively low-wages. What’s happened? High-wage jobs have moved to tech companies offering sky-high wages and long-term benefits.[i]
Let’s look at tech companies. Facebook a few years ago had a market capitalization of almost $300 billion dollars with fewer than 15,000 full-time equivalent employees. Google and other high tech companies follow the same business model. A few companies worth a billion dollars have fewer than several hundred employees. Airbnb is another ghost company with about 1000 employees, owns few rooms, but has more available rooms than the largest hotel groups in the world. By contrast, Hilton Hotels owns its rooms and has 150,000 workers. Go figure!
What should a company do? Life expectancy of mega companies is getting shorter. For example, the life expectancy of a typical European and Japanese global company is less than 13 years. Think about it! Your employer with tens or even hundreds of thousands of VUCANs may not exist in 10 years. The life expectancy of a startup or small business is less than two years.
Work Lesson Earned: In many ways, we’re in a ghost economy. Companies are here today, but possibly gone tomorrow. Robotics, machine learning, Internet of Things, and artificial intelligence are turning companies into tech companies. But, visceral fear is driving many management decisions:
“The question is, how does a non-tech company become a tech company quickly? … When faced with a competitor like Amazon, do you do as Walmart did and invest heavily in tech firms and technical knowledge? Or do you go the way of Sears … into bankruptcy court?”[ii]
[i] ‘The Age of the Ghost Company’, Atlantic, January 7th, 2016.
[ii] ‘Every Company Is Now a Tech Company’, Wall Street Journal, December 4, 2018.