We noticed you're browsing in private or incognito mode.

To continue reading this article, please exit incognito mode or log in.

Not an Insider? Subscribe now for unlimited access to online articles.

Antonio Regalado

A View from Antonio Regalado

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.

AI is here. Will you lead or follow? Countdown to EmTech Digital 2019 has begun.

Register now
More from Business Impact

How technology advances are changing the economy and providing new opportunities in many industries.

Want more award-winning journalism? Subscribe to Insider Basic.
  • Insider Basic {! insider.prices.basic !}*

    {! insider.display.menuOptionsLabel !}

    Six issues of our award winning print magazine, unlimited online access plus The Download with the top tech stories delivered daily to your inbox.

    See details+

    Print Magazine (6 bi-monthly issues)

    Unlimited online access including all articles, multimedia, and more

    The Download newsletter with top tech stories delivered daily to your inbox

You've read of three free articles this month. for unlimited online access. You've read of three free articles this month. for unlimited online access. This is your last free article this month. for unlimited online access. You've read all your free articles this month. for unlimited online access. You've read of three free articles this month. for more, or for unlimited online access. for two more free articles, or for unlimited online access.