Fortune 500, revenue, Toby Elwin, Bob Dylan

Fortune 500 revenue here, won’t get you there

Fortune 500 turnover, Fortune 500 revenue here won't get you there, Toby Elwin, blog

Bob Dylan, esteemed Wall Street analyst, announces Fortune 500 times, they are a changin’

This year’s Fortune 500 companies should adopt the message:  what got you here, won’t get you there.  A decade after the 2004, Fortune 500, 1/3rd of those companies are no longer on the 500 list.  Executive coach, Marshall Goldsmith, intended the message for business leaders, but the Fortune 500 list should also understand revenue that got you here, won’t get you there.

Annual revenue gets a U.S. company on the Fortune 500, but there is no such thing as fixed revenue.

Every business navigates regulatory, tax, political, industry, competitive, technical, and customer elements that constantly change.

To maintain revenue to keep you within the Fortune 500 requires more change and at a faster pace of change than decades prior.

Revenue growth must navigate constant change across a mix of organization capability and human capital competence that seems to increase the complexity to get to great and then add further complexity to stay great.

A recent presentation (video) by HubSpot CEO, Brian Halligan, presents the following:

  • In 1993, 811 of the 1,000, largest, American companies from 1983 remained
  • In 2013, 288 of the 1,000, largest American companies from 2003 remained

The decade from 1983 and 1993 saw 19% turnover of top 1,000.  The decade from 2003 to 2013 brought 71% turnover of the 1,000 largest.  That change happens is constant reality.

In addition, the constant change also accelerates the decade of decay.  One year you are there and the next, no longer.

Brian lends his insight into economic differences and the accelerated disruption of small companies to big better than I can recap, it is worth a view, but here, I want to focus on one vein:  human capital.

Faster Change Faster

The speed and pace of change demands business act, react, respond, and accomplish so much more, with so much less.  Disruptive change demands capability to process change, map change choices, adopt change, and remain resilient to change.

In 2010 I wrote a post on Fortune 500 turnover that simple math called almost 50%.  What if the period took too much hit from the dotcom bubble to provide a relevant source?  Perhaps the set I took from 1999 to 2009 proves an outlier and 4 of 10 companies leaving the Fortune 500 not a concern.  Here are the Fortune 500 for 2009 and extended to 2013 and 2014:

  • 1999 – 2009 42% turnover
  • 2003 – 2013 38% turnover
  • 2004 – 2014 34% turnover

Trending down, one might find.  However, when I look at the 2003, Fortune 500 and extend the 2013 survivors out another year to 2014, 11 years instead of just the 10 year, turnover now becomes 39%.  A shift of one year is a mere 365 day war of attrition.

Business as usual is breaking faster than usual.

Revenue is the result of people performance and organizations don’t change, people change.  Staying on the Fortune 500 requires far more focus on people within and outside your organization.  In 2014, Fortune, themselves, recommend 5 lessons from survivors of the dotcom crash:

  1. Stick to your vision no matter what, but fine-tune it with data;
  2. Serve a need that won’t go away, but may change with times;
  3. Adapt to evolving interests of your users, even if you anger some others;
  4. Establish a deep network of big customers and advertisers;
  5. If all else fails, buy your way into a better business

In that list I see: data, change, evolution, relations, and flexibility.

Agile or Fragile

Business models that moved a company from good to great must adapt further to adopt customer demand for information.

The rise of social media requires an enterprise engage customer communities, where the customers are.

Search engine access to information and community comments now extend beyond simple product and service information to uncontrolled reviews, recommendations, and opinions on quality of the service, the company, and the relationship.

Agile competition forces business change.  Bigger is not better if you can not react.  Access to information has struck the heart of business model relevance.  Customers demand information their way and companies no longer relevant to the customer are no longer relevant.  Access to information and communication demands new capability or find themselves no longer relevant.

Time to react gets shorter and the business change agenda becomes a business survival agenda.

To engage new relationships requires understanding new capability and subsequent capability impact to change people, process, and technology.  This requires an investment in new relationships:

  • Marketing and sales need to meet, engage, and provide constant communication to nurture leads across traditional boundaries.  This requires new compensation, new commission models, and new revenue analytics.
  • Business and Information Technology need new capabilities to provide integrated solutions to collect, parse, analyze, and identify data patterns.  This requires new competencies, new governance, and new roles.

Perhaps financial models are not as healthy as competency models to predict Fortune 500 success.  Can the competing values of a hierarchy accomplish these changes?  Are multi-nationals as nimble to react as start ups?

An ability to see compensation, commission, analytics, competencies, governance, and roles may be the structural elements that topple the Fortune 500.

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