Advice and Information for Finance Professionals

S&P 500 Membership: Can Successful Companies Live Forever?

Rudolph Lukez
Director, ERP Product Marketing, Oracle
This is a syndicated post, view the original post here

Can a great company – including a growing small-to-medium business (SMB) – even when it has innovative products and a transformational business model – live forever?

The answer: It is statistically improbable. Take a look at America’s S&P 500 today and compare it to its inaugural membership in 1957 along with earlier incarnations that go back to 1923. A quick survey shows that many of the companies on the current S&P 500 platform in 1957 do not exist today. Some lost their membership on this prestigious business list and index through merger and acquisition activity, but many simply died.    

Making any business list like the S&P 500 is a remarkable achievement for any company and always a great goal for any SMB that strives to become a large enterprise. It is easy to imagine the collective company excitement of "we made it!” when membership is announced.

Yet, the collective history of the S&P 500 together with data on companies past and present delivers one undisputable conclusion. Unless a company embraces change across finance and operations, it will not survive. By engaging disruptive transformation, the odds of survival increase significantly.

From Horses to Horsepower: A Cautionary Tale

Take Studebaker, a listed member on the original S&P 500 in 1957. The company known for its cars started as a blacksmith enterprise in 1852 and evolved into a famous horse-drawn wagon manufacturer. As it grew from a quality maker of wagons to a leading manufacturer of horseless carriages, Studebaker pioneered the business concept of "dealerships."

But, despite incredible innovation and product diversification, the company encountered endless financial and operational challenges. After 114 years, the last Studebaker product left a factory in 1966 and the company soon disappeared from the S&P 500.

Continuing a Company’s S&P 500 Membership

What distinguishes those companies with staying power that survive and prosper for decades, and continue to belong to the S&P 500?

It's not only about product innovation. Studebaker, for example, was one of the first automotive companies to provide disc brakes. It experimented with building electric cars. One of its 1960s station wagons had a retractable roof in the back, a feature that even today has not been replicated.

Yet, the entire enterprise suffered a colossal failure. It is just one example, repeated often across the entire history of the S&P 500 seemingly every year, of amazingly innovative companies not surviving without the right business perspectives and operational tools.

Rapidly Shrinking Lifespans on the S&P 500

The lifespan of companies across the S&P 500 is getting shorter. Age and status simply do not matter. Today, businesses retain their competitive-edge and leadership based on how they enable technologies to broadly manage their finance and operations. These technologies include cloud-based predictive analysis, enterprise resource planning (ERP), blockchain and machine learning which together help ensure a place on the S&P 500 in the next decade.

Consider that there will be companies on the 2025 S&P 500 that have not yet launched or are incubating in a garage fueled by passion and credit cards. No matter how successful or opportunistic your trajectory looks at the moment, you've got to continue to work really hard and stay on top of what's involved with your business. It's not just about what you're selling. It's now, probably more than ever, also about how you're selling it.

Innovation Alone Isn't Enough

Efficiency, marketing, and technology are the pillars and cloud solutions are the foundation for future proofing any SMB. Systems, software, your data and business processes are enabled through the cloud, which lets you spend more time on strategy than on tactics. You need to understand the trends to be ready for what's next and to pivot quickly to survive.

Because, there are no guarantees of future success for any company. Even the oldest companies are vulnerable as the bar for every finance and operations activities, including services, margins, and products, gets higher.

When Studebaker died, it left behind a lot of history. What if Studebaker had the cloud tools of today? Would that have made a difference? Or would they have still failed, the result of being too far ahead of their time?

Learning from the past helps us to succeed in the future. As you plan and prepare for next year and 2025, embrace the plethora of emerging and next-generation cloud applications and technologies including predictive analysis, blockchain and machine learning.

Put today’s cloud business infrastructure in place across your enterprise, and be future-ready to achieve and preserve your place on the S&P 500, or whichever business index is on your target list.

Learn how you can transform your business with the powerful combination of cloud and transformative technologies.

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