Chapter 7. Complexity changes the game
Everything that we are making, we are making more and more complex.
The complexity of the new networked, interdependent economy creates an ambiguous, uncertain, competitive landscape. Companies must be flexible enough to rapidly respond to changes in their environments, or risk extinction.
Return on Assets is Dwindling
In The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion (Basic Books), John Hagel and John Seely Brown observe that return on assets—the measure of how efficiently a company can use its assets to generate profits—has steadily dwindled to almost a quarter of what it was in 1965.
Fewer and Fewer Companies are Surviving in the Long Term
The S&P 500 has fewer and fewer long-term survivors. New entrants aren’t faring much better. The average life expectancy of a company in the S&P 500 has dropped from 75 years (in 1937) to 15 years in a more recent study.
Turnover in the Fortune 1,000 is also increasing. If your company is in the Fortune 1,000, the chance that you will still be there in ten years is diminishing rapidly.
What is Causing this Increase in Death Rates?
First, the pace of technological change is accelerating. Things are getting smaller, faster, and cheaper. And since ...