Skip to Content

Technology Is Wiping Out Companies Faster than Ever

The lifespan of great corporations is getting shorter and shorter.
September 10, 2013

America’s top personal computer maker, Hewlett-Packard, was dumped today from the Dow Jones Industrial Index, the list of 30 blue-chip stocks picked to reflect the essential makeup of U.S. economy.

That’s a sign of just how fast computing is changing. But technological change may also be shortening the lifespan of all great companies. (Also off the Dow Jones list today are Bank of America and Alcoa. The new additions are Nike, Visa, and Goldman Sachs.)

average company lifespan chart

Someone who has looked at this question is Richard N. Foster, a consultant who helped popularize of the idea of “creative destruction” (also the cover line for our latest issue). That’s the process by which large companies eventually get crushed by innovations made elsewhere.

HP is a case in point. It sells PCs, notebook computers, and printers. And people just aren’t buying as many of those as before. Instead, they’re shifting to the fastest-spreading consumer technologies ever, smartphones and tablets (see “Are Smart Phones Spreading Faster than Any Technology in Human History?”). HP’s business—though still huge—has started to shrink.

To get a handle on whether the rise and fall of great companies is speeding up, Foster looked at another, more inclusive stock index, the S&P 500, which is a list of the 500 most valuable companies traded on the U.S. stock market.

What Foster found is that the rate at which companies get bumped off the S&P 500 has been accelerating. Back in 1958, a company could expect to stay on the list for 61 years. These days, the average is just 18 years.

Companies can fall off the S&P 500 when they get too small, or get acquired. No one really knows why the rate of turnover is speeding up, but technological disruption could be one big reason. Since 2002, Google, Amazon, and Netflix have joined the S&P 500, while Kodak, the New York Times, Palm and Compaq have all been forced off, essentially by changing technology.

Today’s S&P 500 includes many familiar firms, like Apple, AT&T, Corning, Ford, Intel, and Yahoo (and Hewlett-Packard, too). Yet at today’s fast rate of turnover, three out of four names on the list will be banished into obscurity within the next fifteen years.

Foster’s view is that big companies can’t ever out-innovate the market. Instead, he thinks that to stay big, companies need to be willing to exit old businesses and enter new ones—and do it quite boldly. (HP, by contrast, can’t decide whether to jettison its PC business.)

Foster’s data do tell us which company is America’s greatest corporate survivor. It’s General Electric, the only company that’s remained on the S&P Index since it started in 1926.

Keep Reading

Most Popular

A Roomba recorded a woman on the toilet. How did screenshots end up on Facebook?

Robot vacuum companies say your images are safe, but a sprawling global supply chain for data from our devices creates risk.

A startup says it’s begun releasing particles into the atmosphere, in an effort to tweak the climate

Make Sunsets is already attempting to earn revenue for geoengineering, a move likely to provoke widespread criticism.

10 Breakthrough Technologies 2023

Every year, we pick the 10 technologies that matter the most right now. We look for advances that will have a big impact on our lives and break down why they matter.

These exclusive satellite images show that Saudi Arabia’s sci-fi megacity is well underway

Weirdly, any recent work on The Line doesn’t show up on Google Maps. But we got the images anyway.

Stay connected

Illustration by Rose Wong

Get the latest updates from
MIT Technology Review

Discover special offers, top stories, upcoming events, and more.

Thank you for submitting your email!

Explore more newsletters

It looks like something went wrong.

We’re having trouble saving your preferences. Try refreshing this page and updating them one more time. If you continue to get this message, reach out to us at customer-service@technologyreview.com with a list of newsletters you’d like to receive.