We live in a volatile, uncertain, complex and ambiguous world with exponential access to information. We regularly overestimate short-term change and underestimate long-term effect. Things have changed fundamentally in the last two decades. Let’s look at three things — the life of a company, tenure of CEOs and types of companies.

If we track the S&P 500, in the 1960s, the average life-span of a company was 60 years, in the 1980s, it was 25 years and today it is 18. The average life expectancy of a human being is four times more than that of a company.

Short-lived success stories

Take two examples over the last 20 years. Philips, Siemens, Alcatel, Motorola, Palm, Nokia and Blackberry and a few more have either exited the mobile handset business or changed hands. There is a brand going out of business every two years in the cell phone industry.

Or, take aviation in India. East West, Damania, NEPC, UB Air, Modiluft, Deccan, Kingfisher and Vayudoot, among others, have met a similar fate. Here, again, a brand dies every two years.

Second, the tenure of CEOs is getting shorter. CEO tenure in global corporations used to be 8.1 years in 2000; now, in 2013, it is a little over six years. The tenure of Indian CEOs in most sectors in less than five years.

Third, let’s look at the type of companies. The number of public companies is shrinking, giving way to partnerships and PE (private equity) firms. In the last 15 years, the number of public companies in the US has dropped by 35 per cent and in Britain by 48 per cent. In the last seven years, 2,000 private equity deals were closed every year. In Asia, 50 per cent of the listed companies are family-run. India has the highest number of listed companies — a little under 6,000 — and two-thirds of them are family-run. PE firms will make a bigger play in Asia this decade.

Commitment to society

A leading energy company tracked successful long-lived companies. From the study, such companies show courage in four areas: in their commitment to society, in building a sense of identity and cohesion, by being tolerant of hierarchy and diversity and, finally, by being conservative in financial planning. Those lessons are valid for a company, for society and individuals. Uncertainty is a given for all of us. Courage is the answer. To show courage, we need to be realistic. To show courage, we have to fear, and we need confidence. As Nelson Mandela once said, “Courage is not the absence of fear. Courage is not letting fear defeat you.”

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