52% of the Fortune 500 firms since 2000 are gone. On average, an S&P 500 company is now being replaced about once every two weeks. The impact has been caused by Digital Disruptors forging the new paradigms in the way business is being conducted. At the current churn rate, 75% of the S&P 500 firms in 2011 will be replaced by new firms entering the S&P500 in 2027. Over time, the larger trendline is for average longevity to continue to slope downward.
And the same will go for all businesses as few companies are immune to the forces of creative destruction. A digital divide exists between organizations that have built digital business models and everyone else.It’s winner takes all.
Viewed as a larger picture, the S&P 500 turnover serves as a barometer for widespread marketplace change. This all represents indicators of future turbulence and the turbulence points to the need for business to embrace a dual transformation, to focus on changing customer needs, and other strategic technology interventions.
Shrinking lifespans of businesses are in part driven by a complex combination of technology shifts and economic shocks, some of which are beyond the control of business leaders. But frequently, businesses miss opportunities to adapt or take advantage of these changes. For example, they continue to apply existing and antiquated business models to new markets and are slow to respond to disruptive competitors. Most of all failing to adequately envision and invest in new growth areas which often takes time to pay off.
At the same time, we’ve seen the rise of other companies taking marketshare and serving new customers. What these firms all have in common are powerful digital platforms that provide the scale and scope to expand into new growth markets and geographies at speeds never before possible.
The move to digital channels has been steady and relentless. U.S. online sales now account for about 13% of the $3.56 trillion in total retail sales, according to Forrester Research. That is forecast to rise to 17% by 2022.
As we head into a time of increased technological change, the message for business leaders is clear: if you are to sustain and thrive, you must adapt to the market and deliver value to your customers, and you must aim to embrace creative destruction rather than wait to become a victim of this unstoppable force.