Andy Hobsbawm on Drucker And The Future Of The Corporation

[from Small is the Next Big Thing: Built to shrink]

Drucker, who once joked that the only reason journalists called him a “guru” was because they couldn’t spell “charlatan”, also said this at the turn of the millennium: “The corporation as we know it, which is now 120 years old, is unlikely to survive the next 25 years. Legally and financially yes, but not structurally and economically.” So does any of what’s happening online today tell us whether one of the most important management thinkers of the 20th century was right?

You’d certainly need plenty of space for names on a memorial for industry giants and household name brands that lost their corporate lives battling global market forces armed with more advanced technology. Most of whom - Digital Equipment Corporation, say, or American Motors - would have been added in just the past 30 or 40 years; only 16 percent of over a thousand companies tracked from 1962 to 1998 are still around.

Periods of market dominance are also getting shorter: in the 1930s companies spent an average of 75 years on the S&P 500 index, these days it’s more like 15, and it’ll be down to a decade by 2020. The list of companies “Built to Last”, as author Jim Collins once memorably described them, seems shorter by the day.

The crux of the matter is not whether individual companies like General Motors will still exist in 30 years time (although I wouldn’t bet my pension on it), but whether the global economy will still rest on a small number of very large players. I think it’s hardly likely that there will be no concentration of global power and wealth but rather, as Drucker says, that the dominant enterprises will operate and organise in unrecognisably different ways.

This doesn’t mean that the world ends up less globalised in large units, but that it will be a different kind of globalisation. One where Big business is composed of collections of much smaller groups, organised differently and bound together by information networks.

Apart from anything else, if the trans-national titans of the future do not evolve into far more fluid and de-centralised networks, they risk collapsing under the weight of their own top-heavy bureaucratic loads.

I believe that power will drift in two ways: more and more opportunities at the edge, where small entrepreneurial start-ups will be the scene of more innovation, and larger transnational corporations, endlessly acquiring groups, and spinning them out, caught up in market-making and arbitrage. And fewer mid-sized companies, who can offer neither transnational ‘stability’ nor start-up payoffs.