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The Business Death Spiral & the Lazarus Moment January 15, 2012

Posted by David Dirks in business strategy.
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First, the Death Spiral

While much is being made of the pending bankruptcy of Kodak, some fail to remember just how long Kodak has been around.  Kodak might be bleeding badly but it took 131 years to get to this place.  That’s a long cycle time from start to failure.  So while younger & sometimes techie companies might snicker at this venerable, once-great company’s slow death spiral, their potential cycle time  from start to failure is much shorter and more abrupt.

The list of once great companies now teetering on the brink of oblivion or at least in the struggle for survival on some level, is memorable:  AOL, Motorola, Sears, Dell, Blockbuster, Yahoo, Barnes & Noble, and more than a few others.

With the exception of Sears and Motorola, all the others were once high flying companies that lost their edge in a relatively short period of time.  Sears was started in 1886, so even though they’ve struggled in the last 20 years, they’ve had a good long run.  Motorola was started in 1928.

AOL, Dell, Blockbuster, and Yahoo are all relatively recent companies who started, rose, and fell (although not quite dead yet either) in a short cycle time compared to the Kodak’s of the world.  And that’s the funny thing about business failure these days: it seems to move faster in a more compressed time period than ever before.

Groupon is my personal favorite poster child for the shortest cycle time of rise and fall ever…even though they are still in business today.  Groupon had the expectation it would rise forever (and sell lot’s of shares at its initial IPO) but that isn’t to be so far.

I think you’ll see more companies going through what Groupon is experiencing: rise fast, rise big then fall fast, fall big.  While Groupon isn’t dead, it’s not a sure thing either.

In today’s fast moving business cycle environment – especially in tech but not exclusively – you need to build scale fast (lot’s of potential eyeballs or prospects) and then you have to have a business model that is not easily replicated after you’ve achieved scale…if you achieve scale.

Of course, it is possible for those falling to rise again.

The Lazarus Moment

Apple and IBM are obviously technology companies but that isn’t the history that brings these two corporate stories together.  Before Steve Jobs came back to the company in his second act, Apple was only months from bankruptcy.  IBM at it’s lowest point was near death until a new CEO (with no tech experience!) nursed IBM back to live in the early 1990’s.  Both Apple and IBM had a “Lazarus Moment” of coming back from the dead with new life and vigor.

But let’s be clear about this:  The Lazarus moment of both Apple and IBM are the exception to the rule.  They had the good fortune of being nurtured back to health by leaders who came in the right moment and the right time.  They made mostly the right decisions in terms of how to move those two companies from bad to great again.

Perhaps AOL or Groupon will prove everyone wrong and will rise again.  Or perhaps not.

High flier today.  Dead bird tomorrow.  The only difference between Kodak and AOL is that it took Kodak 131 years to fall from grace and only 29 for AOL.

 

 

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