The long haul

You might remember being forced to read the poem “Ozymandias” in high school English class.

It’s the one about the statue of a long-forgotten king that lays in ruins in the middle of the desert. The inscription on the debris, which reads 'My name is Ozymandias, king of kings! Look on my works, ye Mighty, and despair!', is meant to be ironic and speak to the classic conceit of how even the mighty eventually fall.

But there are examples out there that prove it is possible to weather the test of time. Wikipedia’s page on the world’s oldest companies reveals a curious list of the few who have outlasted all the rest. The oldest five are all from Japan, with the earliest having launched in 578 A.D. Just to give you an idea of how old that is, that was the same decade that the Prophet Muhammed is said to have been born.

So, what can we learn from Kongo Gumi, the 1,400-year-old Osaka-based temple construction business that has the distinction of being the longest-running company in recorded history? First, let’s acknowledge a minor, unpleasant detail in this story: even this longstanding business went the way of Ozymandias in 2006, collapsing under the weight of Japan’s declining interest in religious life, and thus temples. A Bloomberg article eulogizing the company’s demise offers this advice based on the company’s history to those who might attempt to break Kongo Gumi’s impressive record:

Pick a stable industry and create flexible succession policies. […] Evolve as business conditions require, but don't get carried away with temporary enthusiasms and sacrifice financial stability for what looks like an opportunity.

This all seems sensible enough, though it comes off as glib, and not particularly insightful. Many companies have followed that advice, and few stand here today to testify to the foolproof nature of that wisdom, however valid.

Dick Foster, a former senior partner at McKinsey and current Yale management professor, and a man who has made it his life’s mission to understand the relationship between innovation and success, says he has never found the elusive “all-knowing” company that has consistently made all the right moves while simultaneously outperforming the market.

Foster says that much like the way that evolution better describes a species than individuals, adaptation better describes industries than companies. Even companies that are on the ball innovation-wise might expect periods where they’re not exactly thriving; that’s part of being ahead of the curve for the long haul. That’s because Foster’s research underscores something he calls “creative destruction.” This is the idea that companies can’t truly light the innovation fire unless they’re ready and willing to burn down past successes. Most companies are far too clingy to their greatest hits to allocate resources towards efforts that may undermine them. He cites Kodak as an example. It’s not that they didn’t see digital coming; they were just unwilling to kill their cash cow to go there. And now look where they are.

By contrast, Apple recognized that it had to decimate its highly profitable iPod market to arrive at the even more Olympian heights of the iPhone. Certainly, the decision to do that was likely not an easy one, but in retrospect, an unimpeachable decision as far as strategy goes; smart phones were coming regardless. Was clutching desperately to the iPod even really an option? The choice now is obvious; build the ship or risk missing the boat entirely.

For most companies, the scenarios aren’t always so dramatic, but it remains true that we can always count on the market to push change, whether the players in the market like it or not. If it’s not you burning down your past successes, it’s going to be someone else. Better it be you. Failure to adapt quickly to changing market forces will eventually come back to bite you. As the Kongo Gumi story tragically shows, it only takes one bite to kill, even after 1,400 years of smooth sailing. Clinging to what is convenient and familiar, over time, is a losing strategy.

Which brings us to the big question: what is the difference between the survivors and all the rest? I’m reminded of a story:

A 96-year-old man was asked by a young woman what the key to his longevity was. “It’s quite simple,” the old man said. “I don’t drink, I don’t smoke, and I run a mile a day.”

The young woman was puzzled. “But my grandfather did all that and he died at 65,” she said.

“The problem with your grandfather,” the old man replied, “is that he didn’t do it long enough.”

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