This raises the question of why incumbents aim to "transform" themselves to prolong their lifespan. The desire for a company to live on is often taken for granted, but should be critically examined instead.
Age certainly doesn't seem to improve performance: a McKinsey study concludes that out of 74 companies that were in the S&P500 for more than 40 years, only 12 (or 16%) managed to beat the average. (Sourced from BBC article)
Some people believe that corporations, much like living organisms have a "natural" predetermined life-cycle they invariably follow. There are many ways to illustrate this, here is a simple version:
As an organisation moves through its various development stages, it attracts different types of shareholders and also different types of employees. Certain investor classes are attracted to different risk profiles, and the same is true for employees, or more specifically the "talent" that makes up a small portion of the overall employee base but tends to deliver the majority of its value.
Rather than this life-cycle being a "natural" phenomenon though, let's examine the possibility that this life-cycle is actually the result of decisions by successive generations of Management.
Much like different shareholder classes are attracted to organisations in certain stages, these stages also attract very different types of Managers. Risk appetite, and arguably more important the core motivation of Managers joining a start-up versus Managers joining a mature incumbent are entirely different.
Or to simplify, on balance Management tend to join early stage organisations to contribute, and later stage organisations to benefit. In this simplified view, once a company drops below a threshold where the majority of its Managers join to personally benefit, rather than to contribute to the well-being of the organisation itself, a net decline can be exepected. The focus shifts from value maximisation to survival.
Value maximisation and survival are not the same thing: it is entirely plausible that a late stage organisation's shareholders are better off with a well executed, "managed decline" agenda, eg. cost be cut ahead of revenue decline, rather than if futile investments be chased that consume precious cash.
It follows, that without significant leadership intervention, late stage incumbents face a serious mismatch in the kind of Managers it needs versus the kind it naturally attracts. Transforming a large incumbent is not for the faint-hearted: breaking "cultural lock-in" requires significant personal energy and commitment. Managers signing up to lead this kind of agenda need to feature a higher risk appetite and be "net contributors" to an organisation.
Could this explain why the majority of "transformation" attempts fail?