Editor’s note: Besides following tech developments and innovation, our author is a musical composer (Juilliard-trained). He has provided a musical composition for you to listen to while reading this column. This piece is called “Half-Life.”
In the business world, companies are often measured by their “half-life,” a term borrowed from physics describing the time it takes for something to lose half its original value. When applied to businesses, it can be used to gauge how long a company remains relevant, profitable, or influential before it starts to lose steam. Over the last few decades, this half-life has been getting shorter. Companies that once seemed unstoppable are now fading away more quickly than ever, and this is a big deal, not only for those companies but also for the startups vying to take their place.
The lifespan of companies in the S&P 500 has significantly shortened over the years. In the 1960s, the average lifespan of a company in the S&P 500 was approximately 60 years. However, by 2016, this figure had dropped to just 20 years. Looking ahead, it is estimated that by 2027, 75 percent of the companies in the S&P 500 will be replaced, further decreasing their lifespan to potentially just 12-15 years. You will probably live longer than most companies.
Company turnover has become a striking feature of major business indices in recent decades, reflecting the decreasing lifespan of companies. According to a 2018 study by Innosight, 90 percent of the companies that were part of the S&P 500 in 1955 are no longer included in the index today. This highlights the shorter lifespans of companies in modern markets. In 1964, the average age of companies in the S&P 500 was 60 years, but by 2014 this had dropped to just 18 years. Similarly, the Fortune 500 list, which traditionally featured large, stable companies has seen significant turnover. A report by Fortune found that nearly 50 percent of the companies on the list in any given year were replaced within 25 years, indicating the rapid pace of change. In the technology sector, the disruption has been even more dramatic, with half the companies that were part of the Fortune 500 in 2000 no longer existing today. Iconic companies like Netscape, Kodak, and Blackberry have been replaced by modern giants such as Google, Facebook, and Amazon, illustrating the swift evolution of the tech industry.
Why is this happening? My three top reasons are the speed of change, globalization, and double-edged start-ups.
The Speed of Change is Making Things Quicker
One of the main reasons companies’ half-lives have been shrinking is the rapid pace of technological advancement. It’s no longer enough for a company to be good at what it does. It needs to be great at anticipating technological changes, or it risks being left behind. The media and retail industries have seen massive shifts thanks to platforms like Netflix, Amazon, and social media. These platforms didn’t just compete with traditional businesses; they reinvented entire business models in a fraction of the time it once took.
Take the rise of ride-sharing services like Uber. Traditional taxi companies, with their decades of dominance, were blindsided by an app that made hailing a ride simpler, cheaper, and more convenient. Uber didn’t need years to outcompete the industry. It moved quickly, riding the wave of smartphone technology and changing consumer behavior. The result? A disruption that left traditional taxi services scrambling.
Startups, with their nimble operations, have been able to capitalize on these technological shifts by jumping in early. When big companies are slow to innovate or stuck in their old ways, startups can swoop in and change the game. The half-life of an established company often depends on how quickly it can innovate to stay relevant. But for startups, they’re in an environment where speed is everything. And if they can move faster, they can often leapfrog larger competitors, gaining market share.
Globalization and Saturation: The New Reality
The next major factor shortening the half-life of companies is globalization. In today’s interconnected world, companies aren’t just competing with others down the street or across the country—they’re up against the best and brightest worldwide. Think about it: a small startup in a corner of the world can now offer its products or services to a global audience, thanks to the internet and logistics technology.
Global competition means companies can no longer rely on size or market dominance to fend off challengers. Once upon a time, companies operating in specific geographic regions were safe from competition outside their local sphere. But now, competitors from around the globe are just a click away. And the market is becoming increasingly saturated, especially in consumer goods and tech industries. This makes it harder for any company, no matter how established, to keep growing at the same rate it once did. As products become more and more alike, companies can no longer differentiate based on quality alone. Price becomes a major factor, and that’s when the race to the bottom begins. When that happens, a company’s market share erodes faster than it can adapt.
Take Kodak as an example. Kodak was once the king of photography, but it failed to anticipate the rise of digital photography. The company’s inability to adapt led to its slow death while newer, more agile companies swooped in and captured the market. In contrast, new tech companies like Google and Amazon have capitalized on globalization and market saturation by continuously expanding their reach and diversifying their product offerings, making it much harder for competitors to catch up.
Startups: The Double-Edged Sword
For startups, the shortening lifespan of established companies can be both a blessing and a curse. On the one hand, it opens up opportunities to disrupt and innovate. Startups can find gaps in the market created by larger companies that are too slow to adapt. On the other hand, it’s also a reminder that the business world is an unpredictable, fast-paced arena where success can be fleeting.
Startups succeed because they are agile, able to pivot quickly and make the most of new technologies. Many startups are built on a foundation of speed and innovation, and they can often outpace larger companies that are weighed down by bureaucratic red tape. For example, Airbnb quickly scaled and disrupted the hotel industry by capitalizing on consumers’ shifting preferences toward cheaper, more flexible lodging options. By adapting to technology and consumer demand, Airbnb captured a market that traditional hotels were slow to acknowledge.
However, the flip side of this speed is that startups face a faster rise and potentially an equally fast fall. Due to the ever-changing nature of the market, startups that experience rapid growth often face sudden challenges as their industry matures or new competitors emerge. Many startups burn bright only to fizzle out when they can’t keep up with the competition or adapt to changing circumstances. Startups are often fueled by venture capital, which provides the resources to grow quickly, but this also creates pressure for fast returns, increasing the likelihood of failure if things don’t go as planned.
Despite this, the global economy’s tendency to reward innovation means there is still plenty of space for startups to thrive. With established companies struggling to keep pace with rapid changes, startups can lead the charge—if they can out-innovate, outsmart, and outlast their competition.
The Bottom Line: Adapt or Disappear
So, what does all this mean for the future? Companies’ half-lives are shrinking, and the old stability and slow growth rules no longer apply. To survive and thrive, large and small businesses must innovate, adapt, and continuously reinvent themselves. For startups, this presents opportunities to step in where big companies falter. However, it also creates the challenge of maintaining momentum in a world where disruption is always around the corner.
Whether running a startup or a legacy company, adaptability is the key to survival in today’s fast-paced world. The companies that will succeed are the ones that understand the need to innovate and evolve at a speed that matches the changing times. After all, in a world where a company’s half-life is shrinking, staying static is the fastest way to become irrelevant.
For continuing information on this subject, please visit the web site for the Silicon Valley International Innovation Institute which I run. This organization is intended to help innovators innovate.
