Aging is a fact of life--and a lot better than the alternative. But what's true for people also applies to businesses. Once the shine of the new concept has dulled a bit, you're into the phase of growing and maintaining an ongoing concern.
In fact, there's a lot of business aging going on. According to the Brookings Institution, there is an "increasing dominance of older firms" in the country.
The share of firms aged 16 years or more was 23 percent in 1992, but leaped to 34 percent by 2011--an increase of 50 percent in two decades. The share of private-sector workers employed in these mature firms increased from 60 percent to 72 percent during the same period. Perhaps most startling, we find that employment and firm shares declined for every other firm age group during this period.
That's largely a product of the decades-long drop in the formation of new U.S. companies, not consolidation, as you might reasonably expect. In addition, the aging appears in companies of all sizes and is strongest in the smallest businesses.
There are clear implications about dealing with entrenched incumbents, but the trend also reminds that if you keep your business going, you'll slip from the new to established category. As companies get older, they can quickly become fossilized and set in their ways, making them vulnerable to attack not only from bigger companies, but smaller innovative firms may leave you in the dust. Here are some steps to take to keep your business limber like a much younger firm.
Update your technology
Technology has become a driving engine for productivity. However, things move quickly and older equipment and software may lack the return you could get by something newer. Not that you should immediately rush out and spend money, but undertake an analysis (getting professional help can be a good idea). Be sure that the analysis quantifies the hard costs and returns. Soft benefits like better communications or faster response to customers are fine, but you want proof that you aren't just driving up costs.
Reexamine business processes
There was a period in the 1980s to 1990s where business process re-engineering was all the rage. Companies would retool how they did business and get more efficient. It was often code for downsizing, but the basic idea of improving your processes makes a lot of sense. Over time, companies become increasingly complex, which makes improved productivity both more important and difficult. Taking a periodic look at whether the processes have become tangled messes is an intelligent move, and helps keep operations more flexible and able to respond to change.
Consider your organizational structure
Just as business processes can become Byzantine, so can organizational structures. You want enough structure to get things done but not so much that the company becomes hidebound. The business of the company should not become creating fiefdoms. If the particular reporting structure fails to serve the company's interests, it's time to shake it up.
Companies should periodically examine their strategies. Changing conditions will have an impact on what the company needs to do. Look at distribution channels, product concepts, market assumptions, and other basic aspects of strategic planning to see if they still hold true, or if you need to consider a new direction.
When you've been in business for a while, you also want to put your branding into question. You shouldn't restrict yourself to potential changes in logos or slogans, but see what the brand, which always means a distillation of how customers perceive you do business, actually says in practice. You might find it necessary to alter some practices to keep your brand where you want it.
Get a management audit
Don't assume that everyone and everything else can be a source of trouble. You might be, as well. Get an outside firm specialized in doing such assessments to find the strong and weak points in your company's management, including you. Some managers might need some extra education and training; others might need replacements.
Check your innovation
A maturing company can fall into the classic Innovator's Dilemma, in which the cash cow technology, service, or offering is under threat by newer developments. Management protects the important revenue source, thus endangering the entire enterprise. The company may be stifling new internal innovation as part of the plan to keep the cash cow safe. Forget that. Stagnation in products and services is a path to stagnation.