On Life and Death, of Companies
We all accept that humans are born and die. Actually this is one of the very few things we accept for sure. Why, then, should people create a different belief regarding companies and organizations?
The famous “Built to Last!” moto…
Why? Why can’t companies just be conceived, do what they have to do (with excellence, don’t get me wrong here), and die? This is as natural as it could be.
The day managers and shareholders learn this, the whole system will work more efficiently. Instead of bankruptcy we’ll see companies acknowledging that their mission is accomplished (or that they have no more means to accomplish it, so it is better to let it go). Things will be more… organic.
Quoting Tom Peters, “I’ve long said that Netscape is one of my favorite companies ever: Born, changed the world, and died … all in the space of 60 months. I’ll stand by that remark.”
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It is a healthy characteritic of free markets, which create winners and losers. Some of the losers are highly admired, usually by those who did not lose money by investing in them. In fact, of course, losses are often caused by uncertainties beyond the control of managers, so if we separate our evaluations of a firm’s strategies and execution from the results, we find more companies to admire. In “The Strategy Paradox”, Michael Raynor has an interesting discussion of why Sony’s MiniDisc strategy was also admirable, even though it failed.
Actually that was the initial intention of incoporation in the early 19th century in Europe and the laws surronding them.
The idea was that you gathered the equity needed to do a trading trip to e.g. China, and when the ship came back the venture was finished - you sold all the goods and distributed the benefits among the shareholders.