Tim Kastelle published an interesting set of numbers on his blog this morning.
Whether they’re precisely right or not isn’t what matters. The trend line is well established: human lifespans keep going up (making the question of how long you’ll work and how long you’ll have to live off your savings relevant to you) and company lifespans keep shrinking (making the question of how secure your position is relevant).
Kastelle believes more innovation is required to keep companies going. I agree with that, up to a point, but that’s because I’m also sure the reason we’re seeing such a short lifespan for companies these days is due to the waves of merger and acquisition (M&A) sweeping the planet.
That phenomenon is the sign of an exhausted business model, and an exhausted economy. When the best use of your capital is to buy up your competitors, it means you’re running out of new markets, new customers, and new ideas.
Plus, as we all know all too well, the bigger an organization gets, the more sclerotic it gets. In a smaller firm, Fred looked after X and Mary looked after Y. Your personal relationship with Fred and Mary (and you knew them, as the place is small enough to know everyone you need to know) moved ideas along. Innovation (which involves a lot of safe-to-fail experimentation and thus a lot of things that never come to market, much less make a market) flowed.
Now you’re in a large organization (you succeeded and grew!) and knowing Fred or Mary, even if they are Senior Vice-Presidents, doesn’t help. They have hundreds, maybe thousands of people, working for them. All of them act like sand in the gears: the innovative idea “wasn’t invented here”. You, in turn, can’t know all of them, nor do you have the years required to persuade each in turn.
That’s why the bigger guys aren’t great innovators. They’re generally pretty good at extending existing products, especially when they can be sold to existing customers. But breaking true new ground is hard for them, and especially when that new ground will cannibalize existing sales and relationships.
That’s why the big get bigger by buying up the other fish around them, and we end up with an economy that contains a few global giants and a raft of micro- to small businesses, but not much in the middle. (The big guys also get a lot of their innovation by buying up the growing up-and-comers: indeed, for some companies like Cisco, they’d say their competitive advantage is “identify, purchase, and integrate the next generation”.)
If you’re measuring individual names, it looks like they’re falling like dominoes. In reality, most are simply being acquired. KGHM (from Poland) replaces Quadra FNX (from Vancouver, Canada). Barrick (Toronto, Canada) replaces Placer Dome (Vancouver, Canada). It looks like two flags fallen, until you realize there are still people working in both Vancouver offices.
But fewer of them, no decision-makers of note, and many career ladders now with a “move or get out” clause attached. Add a little offshoring and outsourcing to the mix, and those offices can shrink immensely.
I remember my father appalled at my having resigned from IBM. He worked for entirely two companies his entire conventional working life — a year as a shoe salesman at Eaton’s department store, and then his entire career at Bell Canada (until, at age 56, he was given one of those lovely mandatory early retirement programs as they went through a wave of shedding management salaries). “How could you leave a good secure job with a big company?” he shouted (and that I was going to the Canadian Imperial Bank of Commerce, bigger in the context of Canada, meant little in mid-rant).
You can still make your career in a big name company: ownership may change a few times, as may the name, but the thread is unbroken. But the whole thing is relatively fragile. All the decisions that affect your future are taken far away from you. Often, corporate headquarters will move away from you, and you’ll be forced to uproot your family (always a joy in this era of two-career households) simply to stay on the safe track.
Small companies and startups, on the other hand, have all sorts of traumas: there’s a reason more fail than succeed in the first five years. On the other hand, the sector is robust. Individual firms come and go, but the startup community in a city is relatively immune to the economy (only who’s winning and losing today changes). It’s much like the restaurants in a business improvement area in a city: they come and go, but the total number of tables doesn’t change much from one year to the next. If you depend on restaurants either as a customer or as a member of staff, you can enjoy the same 10-15 blocks of the city for your entire lifetime.
In an economy where so much seems to be at the “eat our competitors to carry on” stage, that’s a strong suggestion that careers now come in two flavours: those that dance from small player to small player, and those that ride the waves of corporate consolidation. Both can provide some decent security from risk, and both hand you a pile of risk to take on.
Choosing which suits you better is something PDD can help you with.