Being too big to fail doesn’t exist in the business world. Even Jeff Bezos has publicly admitted that Amazon almost definitely won’t be king forever; if anything is guaranteed in this life, it’s that everything is constantly changing. In a landscape of constant flux, there will be constant threats that can derail a growing business, regardless of the size and stage of maturity. Here are the big ones.
- Flimsy Leadership
Leaders make or break a business – there is a delicate middle ground between being too pushy and too much of a pushover; too conservative and too radical; too focused or too vague. It’s very difficult to find the balance that a business needs on a leadership team and because of that, if there is a change in leadership as the business is maturing, the wrong leader can be the downfall of any company, no matter how big. It’s important that incoming managers are thoroughly vetted and probation periods are actually used for their intended purpose.
- Major Changes in Structure
70% of M&A deals fail. When they do, they can bring down empires – look at Daimler and Chrysler’s attempted merger in 1998 that resulted in a $34 billion loss and resulted in Chrysler becoming the first of the Big Detroit automakers to be put in the hands of a private equity firm. Big changes can go very wrong, but that’s true even if there’s not a lot of money on the line. Change management is very important – according to inpulse.com, when employee emotions and motivations aren’t carefully tended to during company changes, it can cause a major impact on employee morale and company culture. The difficulty posed by corporate change illustrates how a mature company can be between a rock and a hard place when a change is desperately needed to successfully compete.
- Supply or Demand Collapse
Whether you are fond of supply-side or demand-side economics, you probably know that you need both supply and demand to successfully run a business.
Supply collapses can occur when a company relies too much on a natural resource that is temperamental – e.g., an indebted fossil fuel processing company during the 1979 oil crisis or a Peruvian anchovy company during an El Nino year. If there is a major hit to the supply side of a business, if the business doesn’t have enough cash reserves to keep itself afloat, it can simply perish.
Demand collapses are arguably more of a threat as they can be more permanent (not including supply-side crises related to climate change). When a customer base stops needing a service or product, a company has to act incredibly quickly and competently to stop itself from going bust. A good example of a company that did this effectively is Twitter, which was originally a podcasting platform that became obsolete when Apple launched iTunes. Grand pivots are easiest when you’re a fledgling company, but if you’re a mature company that has to change, the change itself might kill you if not handled correctly.