Innosight, an innovation consulting firm, recently released their 2018 Corporate Longevity Forecast: Creative Destruction is Accelerating.
This report forecasts continuing corporate turbulence and a reduction in the amount of time firms spend on the S&P 500 index.
According to the forecast, by 2027 the average tenure on S&P 500 will be just 12 years, down from 24 years in 2016 and 33 years in 1964.
The reasons companies fall off the S&P 500 list vary. Key quote from the report:
There are a variety of reasons why companies drop off the list. They can be overtaken by a faster growing company and fall below the market cap size threshold (currently that cutoff is about $6 billion). Or they can enter into a merger, acquisition or buyout deal. At the current and forecasted turnover rate, the Innosight study shows that nearly 50% of the current S&P 500 will be replaced over the next ten years.
The report highlights 5 trends driving increased business turbulence. These are:
1) THE DIGITAL DISRUPTION IN RETAIL HEIGHTENS THE IMPERATIVE OF DUAL TRANSFORMATION.
2) THE RISING DOMINANCE OF DIGITAL TECHNOLOGY PLATFORMS CONTINUES TO SHIFT MASSIVE MARKET VALUE.
3) DISRUPTIVE CHANGE ACROSS INDUSTRIES HIGHLIGHTS THE IMPORTANCE OF CONTINUAL BUSINESS MODEL INNOVATION.
4) CLEANTECH AND THE DOWNWARD PRESSURE ON ENERGY PRICES HAS CREATED NEW WINNERS AND LOSERS IN ONE OF THE WORLD’S BIGGEST INDUSTRIES.
5) THE EXPLOSION OF PRIVATE “DECACORN” COMPANIES SIGNALS ACCELERATING TURBULENCE IN THE YEARS AHEAD.
Each is described in detail in the free report.
One chart that caught our eye is their top 10 "decacorn" chart.
Decacorn is the term used to describe venture backed/startup companies with private valuations above $10 billion.
What we found interesting is 5 of the decorns are Chinese and the rest based in the U.S. None are European.
The size and scale of the Internet in China is not well understood here in the U.S. This chart nicely illustrates it.
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