The numbers everyone is using to scare you

“52% of companies that were in the Fortune 500 in the year 2000, are gone now.”

The first time this number arose, it was 2014. Two years later, at the World Trade Forum, the CEO of Accenture suddenly claimed that digital disruption was the reason these companies disappeared.

As a business owner, that’s enough to make you nervous.

The problem is, that the Accenture CEO was talking out the side of his neck. He does not provide a shred of evidence that supports his claim.

Which, incidentally, happens a lot in large consulting firms.

Gartner Consulting takes this a step further and claims that “40% of companies will be extinguished in the next five years due to digital disruption.”

Very subtle choice of words.

A different number that is cited a lot stems from Constellation Research, another consulting firm.

“The average time that a company spent on the Standard&Poor’s 500 Index, was 61 years in 1958. In 2011, this is just 18 years.”

And naturally, that damned digital disruption is once again put forth as the cause.

 

Some impressive numbers, but it’s bullshit.

It sounds damned unpleasant, doesn’t it?

And yet I’m sick of the word digital disruption.

Worse still, it’s bullshit.

What makes me say that?

Watch the video where I explain my arguments. Or read about them below.

1. The numbers are not complete

The tweet reads:

“Why does your company need an #UnfairAdvantage?

Success in the new millenium does not require years of experience. In 1955 a company existed, on average, 61 years, in 2015 that’s 17 years. Start-ups and digital disruptors are growing with the speed of light. Did you think that you were essential as a taxi company? Whoops, there’s an Uber now.

The best example of the misuse of numbers is the story of the S&P 500 Index. It changes completely when you add, for instance, the year 1980.

Average duration of a company in the S&P 500 Index:

• 1958: 61 years
• 1983: 25 years
• 2011: 18 years

I don’t know if you still remember 1980. I grew up in that time. There was no internet, let alone digital disruption. So, that can’t be the cause.

Looking back on the 80’s I mostly remember the terrible hairdos. Who knows, maybe they were the cause.

2. Companies are existing longer now

When we look at the S&P 500 index, we can see that the average stay in 2001 was hardly 14 years. And in 2016 it was back to 25 years.

• 2001: 14 years
• 2011: 18 years
• 2016: 25 years

So, now that digital puberty is over, companies are doing better once more.

Champagne!

The really good news? Companies are once again in the index increasingly long since the .com bubble of 2000.

And they exist even longer than they did before.

But the fearmongers of digital transformation keep quiet on that statistic.

Even worse: they make up numbers to fit their stories. Because that seventeen years mentioned in the Duval Union Consulting tweet above? They’ve made it up.

3. The composition of the indexes has changed

For instance, in the 90’s service providing companies were added to the Fortune 500.

And the S&P has completely changed its composition through the years. In the 50’s, for example, it only comprised industrial companies.

So, comparing 2011 with 1958 is comparing apples to oranges.

4. Those companies are not bankrupt

Bankruptcy is rarely the reason companies disappear from the index. In the last two years, exactly 1 company disappeared from the list for that reason.

I repeat: 1 company from the Fortune 500 has gone bankrupt.

The primary cause for the disappearance of companies from the indexes?
Fusions, take-overs and the overall economic climate.

Nothing new under the sun.

5. The Fortune 500 has been more stable since 2001 than in the 20 years prior

In other words: since the internet and digitalization have really taken off, the turnover of companies in the Fortune 500 is more stable than in the preceding 20 years.

That’s a wildly different story from the one the consulting firms and agencies are trying to feed you.

More information? Brian Andersen is one of the people who has researched all the numbers in great detail.

Digital disruption = fearmongering by large consulting firms

So: the story of digital disruption as the leading cause of death among companies, is bullshit.

And the idea that you’re signing your death warrant without digital transformation? Bullshit.

It. Is. Not. True.

Stories and numbers made up by large consulting firms.

Consulting firms that live off of the fear that they create.

Because that fear drives companies into their arms, like frightened sheep, as customers.

 

So why are companies going bankrupt? Or are they suddenly losing market share?

Sometimes, of course, there are purely economic causes.

But when you take a look at the rise and fall of companies in the last 100 years, you will see certain root causes come up again and again.

What do companies that suddenly become successful have in common?

• They’re incredibly customer centric
• They remove frustrations that customers have about companies which are already on the market.

What do companies that are suddenly losing market share have in common?

• They’re not customer centric, but business centric
• They don’t know about the frustrations that their customers have. Or they’re doing nothing to change it.

The leading cause that companies are doing less well, is not digital disruption. It’s the fact that they’re losing their connection to their customers.

Example 1: Kodak – from customer centric to business centric

Kodak started as a very customer centric company. Their first slogan is a testimony to this: “you press the button, we do the rest”.

Kodak was in the business of capturing special moments forever.

The Kodak moment.

Relive your memories.

Share moments. Share life.

All slogans which clearly show what was at the heart of the Kodak business: ensuring that people can capture special moments, relive them and share them.

Kodak did this through cameras and primarily through film. And it did so expertly. At one point, Kodak owned 90% of the film industry. And with that we mean rolls of film, not Hollywood.

In 1975 Kodak invented the digital camera. But they decided not to market it. Because they were afraid that the new products would destroy they’re film business.

Bad move. Because other companies did market digital cameras. They’re conquered the world and Kodak is as good as dead.

How is that possible?

Well, this decision makes it clear that Kodak had lost her connection with her customers. Kodak through that they were in the business of rolls of film. But they weren’t: they were in the business of capturing and storing special moments.

But they’d forgotten that. They’d forgotten that film was only a means to an end.

Whoops.

Kodak was also blind to the frustrations of her customers. Because the success of the digital camera can be explained entirely by its ability to take away many frustrations and fears:

• The frustration of having to wait for photographs
• The fearful waiting to see if those photos were successful
• The inability to look at and share those photographs right away

If Kodak had understood this, they would’ve still been successful today.

Example 2: Uber – successful because it takes away frustrations

In a short time, Uber has taken over a large share of the market.

And that’s not because of digital disruption. And it’s also not because of the sharing economy.

Uber has become this successful this fast because it removes a ton of frustrations that customers of traditional taxi companies were having.

• How on earth do I order a taxi in this city?
• How can I recognize my taxi?
• How long will I have to wait?
• Can I pay with my credit card?
• How much is this ride going to cost?

Frustration that taxi companies weren’t seeing because they were too focused on their business and not focused enough on their customer.

Uber has simply played into the customer’s wants.

More examples?

And there are dozens of examples. Not just in the last 20 years, but rather in the last 120.

Be sure to read the book Be like Amazon by my friends Jeffrey and Bryan Eisenberg.

You’ll see the same pattern over and over again.

• A company becomes successful because it is truly customer centric.
• Because it removes frustrations that other companies in the market are no longer seeing because they’re too focused on their businesses.
• Once they’ve become successful, a company becomes more business centric than customer centric
• The successful company suddenly loses market share because they are not recognizing and removing the frustrations of their customers.

Digital disruption? Hogwash.

Not being customer centric is the biggest threat to companies

I think it’s obvious: digital disruption as such does not exist. And it’s not something that you need to be afraid of.

The primary threat for a company is that it stops being truly customer centric.

Not being customer centric destroys companies.

Not removing your customers’ frustrations, is the primary reason that you’re losing market share.

It’s a typical phenomenon: you start a business, you’re completely customer focused, but when you start running smoothly, you lose that focus and you’re mainly concentrating on your business. And then you become blind to your customers’ frustrations.

Make sure you don’t fall into that trap!

The solution: take away your customers’ fears and frustrations

To do that, you have to put in the effort to get to know your customers and potential customers through and through.

And you must always be searching for the answer to essential questions such as:

• Why does someone become a customer at my company?
• What are their explicit and implicit motivations?
• What stops people from becoming customers?
• What is the one thing that would make your customers even happier?
• What frustrates your customers?

We’ll gladly help you figure it out.

Because we are happy to help you make your company even more successful by really putting your customers front and center, and making them happy.

Like we’re doing that for companies like Carglass and Yoast.