Inspired by this blog on “Pink Slip,” “Business Darwinism and the will to survive“, I ponder how even great companies survive long term. The very concept of lasting [forever] can almost seem counter intuitive (in the world of capital markets). I see the cycle of even those companies “built to last” as destined to un-last or unravel. In the beginning, there is great euphoria. The future is bright, money is raised. As [sales] growth continues, so stock price climbs. Then we track growing market shares. As market share grows ever higher, growth starts to slow. Pricing goes premium and the real game becomes growing the industry. The goodwill of the brand name becomes current currency. Stock dividends come into the picture and the stock stops its ascension upwards in anticipation of further deceleration. Because of the slower growth, there is rotation in the institutions owning the shares. And if market share does continue to grow (depending on how much the industry itself still grows), finally the threat of anti-monopoly or fat cat management inevitably set in. Brand extensions fall flat or dilute the original brand name. Stock price crumbles. Time for reinvention. Merger, takeover, MBO, LBO or other follow to start another cycle. If the company has created a true brand with a real DNA (and a passionate consumer base), then one has to believe the brand may survive, even if the company does not. Whether or not the few companies cited in Jim Collin’s Built to Last continue to survive given the ever changing consumer habits, all the remainder of the “normal” companies are subject to the laws of a true life cycle. Even entirely private fully funded companies that can shun the pressures of their [capital market] stakeholders face the issues of life cycle when it comes to handing over the baton to the next generation of the family — and that could be the subject of another blog altogether. In the meantime, you might enjoy reading this well crafted blog and several comments “Built to Last – Not.” [Taken down]

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