All winners lose. The market leader is a dead man walking. The incumbent is cursed with inevitable failure. That seems to be the prevailing sentiment among many in the investment and journalism worlds: The smart money, they argue, bets against the incumbent. Their surmise: The world will change. The reigning corporation will fail to adjust. The right thing to do? Short them (assume that their share price will fall). Short the winners. Bet against those who flourish. Because all winners must lose, and sooner than we think.
I have heard this argument before, but for the first time I am hearing it argued as something unobjectionably and manifestly true. At some point in the last 10 years, "short the incumbent" had gone from being a daring proposition to received wisdom. There is evidence, to be sure. Of the top 25 corporations listed in Fortune in 2000, only 12 were still there in 2010. Let's put this another way: in the decade between 2000 to 2010, half the winners lost.
I have heard this argument before, but for the first time I am hearing it argued as something unobjectionably and manifestly true. At some point in the last 10 years, "short the incumbent" had gone from being a daring proposition to received wisdom. There is evidence, to be sure. Of the top 25 corporations listed in Fortune in 2000, only 12 were still there in 2010. Let's put this another way: in the decade between 2000 to 2010, half the winners lost.
And the structural factors are clear enough. The world is changing more quickly. Black swans are multiplying. Disruption is everywhere. The incumbent can end up failing dazed and confused.
Success makes the corporation believe it has got things right. So change feels like self-betrayal. The competition forces a new business model. So change feels like a tumult. The new market often forces a move from a premium price position to a commodity one. So change feels like a give-away. Adapting to change feels just plain wrong.
But the market has spoken. It's telling us we have a systematic problem. It's time for a systematic solution. We cannot nickle and dime our way out of this one. We need a big, bold answer. Assuming, that is, that we want to escape the curse of the incumbent.
My version of this answer — and I am sure there are others — is to build a second corporation and wrap it around the first. So now we have two. The first corporation is defined pretty much as it is now. And the second corporation is another creature altogether, with a different set of principles and processes.
The first corporation exists to win. It exists to find, extract, and capture available value. Leave this just as it is. But let's acknowledge that this first corporation exposes us to risk. After all, it is designed to work with the world as it is. So it must be out of alignment with the worlds that may be. It make us a prisoner of the moment. The second corporation is looking for those worlds that may be. It's task is not to win, but survive
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