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Companies Must Not Lose Any Time in Driving Their (Digital) Transformation

For companies, there's no time to waste in driving their (digital) transformation
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This week I had some exciting conversations about the development of the global markets.

One thing is certain, regardless of whether the company is disruptive or traditional, the challenges will not become any less in the foreseeable future.

Regardless of the framework conditions of individual sectors or markets, there is one factor that I believe all market participants have to deal with:

T I M E !

If I look back at one or the other conversation in this context, it seems to me that some decision-makers — especially from traditional industries — believe that they still have enough of this important resource.

Against this background, let’s take a look, for example, at the per capita sales in German mechanical and plant engineering from 2014 to 2019, i.e. before the pandemic: According to Statista, sales per employee ranged between 210,400 euros (2014) at a minimum and 219,200 euros (2017) at the top.

The more or less small fluctuations could give decision-makers the impression that they have done everything right. And from a certain point of view, it certainly is.

Is it wise to just keep going?

To answer this question, let’s take a global perspective: specifically on the development of the S&P 500 index and the Fortune 500 list.

From 2000 to the present, 52% of Fortune 500 companies no longer exist in their original structure. It’s estimated that 75% of today’s S&P 500 Index will be replaced by 2027. For companies, there’s no time to waste in driving their (digital) transformation.

S&P 500 index

In 1958, companies listed on the S&P 500 had an average tenure of 61 years. Figures from research firm Innosight show that the average tenure dropped to 25 years by 1980. In 2011, the average tenure even dropped to 18 years. At the current churn rate, Innosight estimates that three-quarters of today’s S&P 500 will be replaced by 2027.

Fortune 500 list

Research shows that since 2000, 52% of Fortune 500 companies have either gone bankrupt, been acquired, or ceased to exist due to digital disruption. The collision of the physical and digital worlds has impacted all dimensions of society, commerce, business, and the individual.

A study by Constellation Research points out that companies rise and fall for many reasons. However, digital disruption is clearly responsible for a large proportion.

Final thought

The question of whether it is wise to just carry on as before is a question that each of us must answer for ourselves. However, I think the numbers above should be reason enough to think about it.

Experience has taught me one thing: Whether it’s in business, sport, or life, it’s never a wise decision to rest on your laurels of the past.

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Mike Flache

P.S. Together with talented teams, I build digital businesses worldwide. If you would like to exchange ideas about digital growth, feel free to contact me.

Cover image: Михаил Павленко on Unsplash
Source: Harvard Business Review, Innosight

Disclaimer: The information provided in this article is solely the author’s opinion and not investment advice — it is provided for educational purposes only. By using this, you agree that the information does not constitute any investment or financial instructions. Do conduct your own research and reach out to financial advisors before making any investment decisions.

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