What are the odds of Apple surviving?

A tale of two Apples

What are the odds of it surviving another year, ten years, 50 years?

Companies don’t last long. A recent study that analyzed thousands of European firms yielded a corporate life expectancy figure of 12.5 years. The Boston Consulting Group analyzed the entry, growth, and exit dates of 35,000 publicly listed companies and determined that one in ten of all public companies fail each year, a fourfold increase since 1965.

As I illustrated many years ago in a talk titled “The Unfortunate 500” most companies die not long after adolescence. Of the Fortune 500 1955-1960 cohort, the 81 companies which joined the index in those years, only 7 remain there today. One third of the corporations on the 1970 Fortune 500 list were no longer in existence thirteen years later. Broadly speaking, as a population, large companies that make it to the Fortune 500 listing have life expectancy within that group of 17 years.

To illustrate further, here is the list of the companies that joined the Fortune 500 In 1976, the year of Apple’s birth:

Entry

Company

Exit

1976

SuCrest

1976

1976

International Systems & Controls

1977

1976

Kewanee Industries

1977

1976

Hunt International Resources

1979

1976

Peabody Holding

1979

1976

Consolidated Aluminum

1981

1976

HP Hood

1981

1976

Envirotech

1982

1976

Peabody International

1984

1976

Hughes Tool

1987

1976

Cameron Iron Works

1990

1976

Foxboro

1990

1976

Tektronix

1994

1976

Mapco

1998

1976

Molson Coors Brewing

2009

1976

Baker Hughes

2014

1976

Masco

2014

1976

Ball

2014

1976

Ecolab

2014

1976

CF Industries

2014

Not one of those in the 1976 cohort are on the list today. The longest to survive managed to stay on for 38 years.

Apple joined the Fortune 500 in 1983. Here is a list of all the other companies that joined the index in 1983.

Entry

Company

Exit

1983

North American Coal

1983

1983

Datapoint

1986

1983

MEI

1986

1983

Mobay

1986

1983

Coleco Industries

1988

1983

Liquid Air

1988

1983

AH Robins

1989

1983

Sipco

1989

1983

Wilson Foods

1989

1983

Oxford Industries

1991

1983

DR Holdings Inc of Delaware

1992

1983

Media General

1992

1983

Wisconsin Dairies Cooperative

1992

1983

Ametek

1994

1983

Hanson Industries NA

1994

1983

Meredith

1994

1983

Snap On

1994

1983

Sun Diamond Growers

1994

1983

Universal Foods

1994

1983

Worthington Industries

1994

1983

AMDAHL

1994

1983

Dr Pepper Seven Up

1994

1983

Diebold

1994

1983

Echlin

1998

1983

Stone Container

1998

1983

Tyco International

1998

1983

Flowers Industries

2001

1983

Cooper Tire & Rubber

2005

1983

Tribune

2008

1983

Holly

2011

1983

Apple

—

Apple is the only survivor from that cohort.

Out of about 2500 companies that existed in the Fortune 500 index since 1955, 50 are still in it. That’s a survival rate of only 2%. Approximately 87% of all people born globally between 1955 and 2026 are still alive today. This is why I titled my talk The Unfortunate 500. If this was a human population it would be considered chronically unhealthy.

However, unlike people, large companies that make it past age 50 tend to stay alive (or independent, as most who exit the index do so because they are merged or acquired–another distinction from biological entities).

But the way they manage to be resilient is by adapting to a changing world in some fundamental ways. The environment a business lives in (technological, market, economical) changes more rapidly than the biological environment (genetic, radiological, reproduction).

Companies have to essentially re-define themselves and become something that has little to do with their initial conception.

In the case of Apple there are clearly two separate entities. The original and the one that was reborn in 1998 when Steve Jobs returned. When you look at the company closely, it’s pretty clear that the second Apple was fundamentally different even though the original founder returned.

In some ways one could argue that Apple 1.0 eventually strayed from its original culture and the reset in 1998 returned it to a core that was resilient but it’s more complicated than that.

To measure “distance” in terms of corporate culture you need to think of culture as a three dimensional vector. it’s a composition of resources, processes and priorities (RPP). The combination of these forms what we call the “DNA” or the “culture” or the unwritten constitution of the firm.

The vector of RPP for Apple changed dramatically in Apple 2.0 in terms of resources (capital, software, silicon), processes (engineering, operations and marketing), and priorities (focus, integration, product/service cohesion)

I would summarize it as there being a tangible “theory of the firm” for version 2. The first version was very much a theory of the team: a group of great people without a binding operating model.

Stay tuned as we explore the Theory of Apple.