What Comes After (in Business)

Tuesday, June 19, 2007

Two recent articles got me thinking about the life cycle of companies and business in general. Neal Boudette’s article in yesterday’s Wall Street Journal (“Detroit Confronts Surplus of Showrooms”) and David Gross’ guest column in the June issue of Inc. (“The Truth About Investment Bubbles”) both allude to the fact that death is as much a part of the business world as the living world. Couple this with the fact that most religions believe that death is not the end of the line, that there is some type of re-birth that occurs, you can find yourself in a philosophical discussion that has real business ramifications.

In the case of the saturation of Big 3 dealerships left over from their heydays, Boudette points out in his article that it’s not so easy to pull the plug on a dealership. Given state laws that protect franchisees, some of these smaller dealerships can hold on for some time. Boudette describes one Lincoln-Mercury dealership in southern California (average sales of 20 to 25 cars a month) that turned down a buy-out offer from its Toyota competitor down the street. “But Mr. Mayberry, 58 years old, said no thanks. His father had bought the business in 1961, and he does enough business between new-car sales, used cars and service to make a profit and pay his salary and those of his two brothers and employees.” I’m sure from Ford’s perspective, it would be better if Mayberry Lincoln-Mercury closed up shop. And maybe it is time for it to die. But as long as it is making a profit, as long as it is still breathing, why bring it to a premature death? But the longer it is alive and diluting the local auto market, the greater the drain on Ford.

Gross talks about how major investments in infrastructure over the past 150 years has sometimes led to short term death but long term growth. The over-building of such things as telegraph lines, rail lines, and fiber-optic cable created the possibility that some players would not survive the shakeout. But those that did or those that built on this inexpensive infrastructure were able to create new businesses in a cost-effective manner. So just as we benefit from the fossils left behind of dinosaurs long gone, so do businesses build and succeed on the skeletons of over-built infrastructures. Nothing ever disappears completely.

Sometimes what needs to die in order for a re-birth is the death of a myth or self-perception. Some companies have such a storied history that when the present starts to pummel them, they cling to the past and its finely tuned myths. The company may not need to die but how its stakeholders view its past, present, and future may need to die off. We can only begin to let go of the past if we believe that something good and new will rise from the ashes. Something always comes after.