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Should businesses be built to last or built to change?

Around the world, the lifespan of businesses is shrinking at a rapid rate. Why is this happening? And what can we do to achieve lasting success?

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In times of rapid change, businesses need trusted leaders who can think strategically, act with integrity and use their influence to empower prosperity. Around the world, ICAEW Chartered Accountants are using their skills and expertise to help organisations and institutions of all sizes turn uncertainty into opportunity. Here are some of the key social, economic and financial issues our members are addressing right now.

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"Today, the average S&P 500 company lasts only 15 years, and 75% of today’s S&P firms will be gone or going by 2027."

In an era where change is occurring at an unprecedented rate, the lifespan of companies has dramatically reduced. As a result, many brands and businesses that were once household names are now fond memories. Today, the average S&P 500 company lasts only 15 years, and 75% of today’s S&P firms will be gone or going by 2027.

Reasons behind shorter business lifespans

The sheer size of large companies makes it difficult for them to be nimble. So when faced with change and challenges, such as new technologies and increasing customer demands, it’s harder for them to adapt quickly and effectively.

Small and medium-sized enterprises (SMEs) are not faring too well when it comes to endurance, either, but it’s not size that’s the issue for them. Instead, they battle cash flow problems, red tape, high rents and tough competition – factors that tend to result in SMEs being acquired, merging with other organisations, or simply shutting up shop.

Even companies fortunate enough to succeed in a tough marketplace cannot rest easy, as success has been shown to impede future innovations. Take Kodak, for example. A Kodak engineer invented digital photography in 1975, but the company decided not to invest in it as it was content with print photography’s widespread popularity at the time. Now, Kodak’s story is one of caution – a reminder to entrepreneurs and business leaders that they should never be satisfied with the status quo.

So, the issue isn’t really about whether businesses should be built to last or built to change. It’s clear that businesses need to be built to change to not only survive, but succeed. How can you help your business achieve lasting success? Here are a few tips.

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Be bold like an SME

Are you willing to disrupt your own business model? It’s the kind of thing SMEs do often and well, as they are structured in a way that allows them to easily adapt to new circumstances and challenges. You should always keep a close eye on the opportunities, obstacles and competitors on the horizon – this will ensure that you’re more prepared for any disruption to your business.

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"Having a strong purpose at the core of what you do can help you structure your business in a way that’s flexible and receptive to change."

Be purposeful

Does profit always equate to success? The notion that success only comes through profit, and that profit should be maximised, are ideas that have become generally accepted since the mid-1970s with the rise of neo-liberal economics. Today these are increasingly questioned. 'There is nothing wrong with earning a living,' explains Richard Spencer, ICAEW’s Head of Sustainability. 'It is just that the profit model is a means of delivering a purpose and not a goal in itself.'

Having a strong purpose at the core of what you do can help you structure your business in a way that will help you measure your progress beyond profit – and be flexible and receptive to change. It also gives your customers and partners a reason to be loyal to your brand or business. This is where experts like chartered accountants are a valuable asset – they can use their in-depth knowledge of the business and industry to help you pin down your purpose and structure, so your business is built to change, and therefore built to last. Richard Hutton, group financial director for Greggs, saw an opportunity to respond to a need in his community when he launched the Greggs Breakfast Club for school children. An initiative with social responsibility at its heart, the scheme is making a difference in communities across the UK while creating brand presence.

Keep your customers and employees close

You’re probably already keeping a close eye on your competitors, but what about your customers and employees? After all, they’re the ones who are most likely to provide relevant, constructive feedback or advice, and they’ll be directly impacted by any business changes. So listen carefully to their challenges and needs, and let their behaviours dictate your business’s focus. By keeping your base happy, you’re more likely to grow your audience and, therefore, your business.

As a leader in accounting, finance and business, ICAEW focuses on ethics, technology and innovative thinking to help organisations and professionals thrive in the face of change. So together, we can achieve more than you’d imagine.

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