In the March 2006 issue of Vanity Fair magazine, Michael Wolff has a fascinating story about Carl Icahn’s attempt to take over Time Warner the $80 billion media titan. Icahn’s premise is that Time Warner has no reason to exist and that it would be better for shareholders to break it up and sell the parts for scrap. While the main theme of the story is a sad tale of how the ambition of Time Warner’s management overwhelmed common sense and good business decision-making, the back story raises an even more interesting question. Is a company ever too big to disappear?
At first it seems shocking to suggest that a company as big as Time Warner could just drop off the map. You always assume that something as big as Time Warner is semi-permanent.
Take a Stroll Down Extinction Alley
Not that long ago, the landscape of midtown Manhattan was dominated by the Pan Am Building rising up above Grand Central Terminal. Travelers flew on Eastern Airlines, the wings of man, from New York to Miami. Businesses used computers from Digital Equipment Corporation and their executives drove cars made by American Motors. Hmmm. In industry after industry, leaders don’t just fade, they fade from existence. I guess we shouldn’t be surprised after all.
Could it happen again. It not only can, you can bet that it will. Microsoft effectively put a number of other companies out of business when those companies moved slowly to Windows applications. Microsoft itself has been stuck in the doldrums because it missed the rise of the Internet. The pain resulting from its mistakes has been cushioned by the huge war chest that it amassed in the applications business. In categories where the change comes looking for you, leaders often tumble.
There are two common threads in all of these corprorate disappearing acts. They place too much stock in their own permanence. As an executive, you can take your continued success as an entitlement. It has to be earned every day. Second, you cannot bungle your response to major shifts in the market and the economy. In my next post, I’ll talk about the difference between fads, trends and cycles. The differences are strategic not semantic.