While the old saying goes ‘old is gold’, it is really amazing how companies all over the world have managed to survive for decades – some even for more than 100 years. Century-old American companies like General Electric and Ford appear ancient when viewed alongside modern pure players like Google and Facebook. However it is interesting to note how these companies managed to survive for so long given the drastic changes in society, tastes, technology and business models that have happened over the last many decades.
“Response to change is the first condition for survival in business,” says Dwijendra Tripathi, a former IIM professor who authored The Oxford History of Indian Business.
IBM is prime example of how a company managed to survive the earth shaking changes in the IT industry that took place in the last 60 – 70 years. Experts view the ability of the company to constantly adapting through the tumult of recessions, technology shifts and CEOs succession.
And while adapting to the changes, the company has managed to remain at the forefront through the decades and tops several of its whippersnapper rivals in some regards. Despite being in business for more than 100 years, IBM is still the fifth-most-valuable U.S. company just behind Microsoft.
“It’s the predominant pattern that companies eventually self-destruct. Companies that survive 100 years or longer are “a special and rarefied group,” says management expert Jim Collins, author of books such as Built to Last, who studies corporate longevity.
Century old companies are no new to business. Among 5,000 U.S. publicly traded companies, 486 are 100 years or older, according to an analysis by Standard & Poor’s Capital IQ.
However, the road has not been a smooth one for IBM as the company has endured the surge of popularity of the typewriter, which gave way to personal computers and the Internet along with intense competition from old and new companies. Experts are of the opinion that IBM managed to tide over the ups and down through a rare blend of ingenuity, persistence and a strict adherence to its core objectives.
“If you consider what IBM’s mission is, it’s not about computers or technology. It’s about allowing its individual employees to create ways for its customers to solve operational problems,” Collins says.
Another example of a company that has stood changing times over nearly a century is the world’s leading valuation and corporate finance advisor, specializing in complex valuation consulting – Duff & Phelps. The company started off in 1932 as a firm to provide investment research. However, over the decades, Duff & Phelps has adapted to the growing changes in the corporate and business world to expand its services the world over, displaying niche areas of competence such as valuation for M&A, restructuring advisory or compliance and regulatory consulting among many other capabilities. “Duff & Phelps can be seen as a niche player in the financial world, a sort of “next up” player. Our core business is best described by “powering sound decisions”, i.e. giving peace of mind to decision makers who come across engaging decisions on a daily basis,” explains Yann Magnan, Managing Director at Duff & Phelps.
The main reason why Duff & Phelps always managed to adapt its business environment is probably its proactivity: not only the company always maintains a clear focus on being “the elite of advisory firms”, it also plays a major part in shaping technical and regulatory developments of the job. “Advisors at Duff & Phelps permanently scrutinize the evolution of standards and they actively take part in reflections about it. As our company has become a privileged interlocutor over time, we generally play a significant part in valuation standards setting”, says Magnan.
This ability to move into new businesses developments without abandoning core competences is evident in the cases of both IBM and Duff & Phelps.
Vicki TenHaken, professor of management at Hope College, who has studied companies that make it to their 100th birthday, says: “companies that last almost always put making money secondary to a broader and more ambitious stretch goal”.
“The continuity component is surely helped by the custom of adopting (adult) sons to carry on the business, displacing ‘natural’ sons when direct progeny are not viewed as suitable,” says Mike Smitka, a professor of economics at Washington and Lee University while referring to privately owned companies that have given preference to a competent outsider to take over the company reigns over a family heir.
Another prerequisite to survival and sustainability is the ability to innovate. However researchers are of the opinion that very old companies that have managed to fight the harshness of time and yet prosper for decades “don’t chase mad science innovations willy-nilly or desperately, but they do it very carefully,” according to Ten Haken. Experts are also of the view that companies that are old need to have the capability to predict the future. This is one of the most important factors for survival – an emphasis on innovation and reinvention.
Nokia, for example, was a pulp manufacturer before it got into electricity and then mobile phones; at some point its brand name was even used on galoshes. About that, the company writes: “Nokia’s history dates back to 1865, when mining engineer Fredrik Idestam set up his first wood pulp mill at the Tammerkoski Rapids in Southern Finland. A few years later he opened a second mill on the banks of the Nokianvirta River, inspiring him to name his company Nokia Ab in 1871.”
The 20th century for Nokia has been a back-and-forth period during which the company experimented a lot: from cables and rubber boots to its first fully-digital local telephone, ranging from radio-transmission equipment, Nokia only made the decision to make telecommunications its core business in 1990. The firm then became the world leader in mobile phones in 1998 for more than a decade, and now focuses on large-scale telecommunications infrastructures, technology development and licensing.
“Research and development is always a delicate balance between maintaining a long-term view and remaining sensitive to short-term objectives,” observes Mark Vergnano, executive vice president at DuPont.
The best description of the secret of very old companies surviving the test of time is given by Collins & Porras who describe this unique approach to change in their book Built to Last: “Visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideas.”