Tuesday, January 17, 2012
They say 40 is the new 30. When it comes to corporate growth, I sure hope so.
Management professors Charles Stubbart and Michael Knight completed a study of more than six million companies and found that only a fraction of them make it to their 40th birthdays.
In another study, economists Steven Davis and John Haltiwanger revealed that over a 28-year period (1977-2005), some 15% of jobs were destroyed each year, even as the net number of jobs in the U.S. grew by an average of 2% per year.
Those are two stunning statistics. As I explain in When Growth Stalls, our own research revealed that more than half of all companies stall over the course of an average decade–to say nothing of the past half-decade, which has been anything but average.
The lesson? We operate in a magnificent economy where competition and changing dynamics continually spawn new companies, new products and new services, weeding out weaker, less innovative offerings and enhancing everyone’s standard of living. That’s something to celebrate, not to mourn. The reason some jobs (and companies) go the way of the dinosaur is because more, newer and better ones arise to take their place.
No one can stop economic progress. The best we can do is recognize how it comes about and try to stay in front of the parade. As I intimated in a recent BusinessWeek.com column, as business leaders our task is to ensure that we’re on the creative end of “creative destruction”, not the other (much less pleasant) one. If and as we do, everyone will be better off.