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Building Endurance Over Business Cycles

Corporate success is increasingly short-lived and CEOs need to address their core responsibility of building a fit-for-future organisation
Deepak Malkani   New Delhi     Print Edition: December 29, 2019
Building Endurance Over Business Cycles

In this era of exponential change and ever-shortening lifecycles of products and services, headlines often focus on the overnight superstar, the trailblazing unicorn. This attention is simply because the wealth generated by a unicorn in a few years has started to equal what an older generation of firms would take decades to earn. The importance of sustainability and longevity is often overlooked. It is time to change this perspective and understand and recognise the qualities that determine long-term business success.

Corporate success is now increasingly short-lived, as indicated by the changing mix of the world's 500 largest companies over the last 60 years. Only about 60 of the 500 firms are still on the list.

Even more telling is the change in the top 10 companies globally by market capitalisation. In 2008, with oil priced at $100 a barrel, five of the top 10 companies globally were oil and gas companies. In 2019, seven of the top 10 are technology platform companies, accounting for 80 per cent of the value of the top 10. No oil company has made the top 10. The prediction made by the British mathematician Clive Humby in 2006, about data being the new oil, has become a reality.

We are truly living through an age of digital disruption. The call to action for leadership has never been more clear. CEOs need to address their core responsibility - building a fit-for-future organisation that stays resilient and relevant for the "digital present" and reinvents itself for an undefined "digital future".

Three important themes that the CEO must focus on are:

Staying relevant: The digital world requires new competencies and mindsets at all levels of the organisation. The challenge is to prepare the entire workforce for a new world where an increasing number of jobs are done and complex decisions are taken by AI-based automated bots. Upskilling the organisation requires an understanding of what new roles will be required, what roles will change, requirement of new skills, as well as defining how humans will coexist with AI.

Building resilience: As data becomes ubiquitous, the need to define, protect and leverage it effectively and ethically is becoming an imperative. In 2018, a data privacy breach at a leading social media company caused the largest devaluation of a company in a single day - a $120 billion loss in market value. Data protection and privacy are the new fault lines for governments, consumers and large businesses. Boards and CEOs need to drive new standards in corporate governance, to enhance trust with consumers.

Fueling reinvention: Entrepreneurs around the world are imagining and creating a technology-led future. It is more important than ever before for business leaders to look far beyond the bend in the road. A recent study by PwC identified nine competencies that a leader must have to succeed in the future, and "disruptive envisioning" emerged at the top of the list. An assessment of the top 10 most valuable firms in India over the last 30 years illustrates the transition of the Indian economy from manufacturing to services. In 1990, the top 10 included four textile companies; none of which survive on the list today. Only three have endured over this period. And the one that was most successful was a company that first transitioned from a small textile manufacturer to a fully integrated oil and petrochemicals giant and is to now a telecom and data platform leader. This company exemplifies the need for renewal and reinvention for long-term success.

In a country and culture that intuitively understands the cycle of creation and destruction, this must surely resonate. Indeed, the future is not what it used to be. Organisations and leaders that recognise this - and focus on building resilience, staying relevant and consciously reinventing themselves for the digital age - will be fit for future.

Deepak Malkani is Partner and Leader Management Consulting, PwC India.

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