“One general law, leading to the advancement of all organic beings, namely, multiply, vary, let the strongest live and the weakest die.” –Charles Darwin
As you can see from the quote above, I was recently perusing the works of my favorite business advisor, Charles Darwin, after I saw this statistic on Twitter:
Wow, that is some serious survival of the fittest, or maybe better to characterize it as a whole lotta death of the inflexible. And it is probably a scary thought, or it should be, for those who sit at the top of the healthcare mountain right now. Today’s king of the castle can be tomorrow’s court jester if one is not careful. Look no further than the words of Charles Darwin, who really should have been a management consultant, for the cautionary tale:
“It is not the strongest or the most intelligent who will survive but those who can best manage change.” –Charles Darwin
If you didn’t know any better, you would think the guy was writing about startups vs. established industry, not finches and tortoises.
But back to the Fortune 500. Half a century ago, the life expectancy of a firm in the Fortune 500 was around 75 years. Now it’s less than 15 years and declining even further according to Steve Demming in an article called “Why Big Companies Die.”
I looked up the original Fortune top 10 and found that they were General Motors, Exxon, US Steel, General Electric, Esmark, Chrysler, Armour, Gulf Oil, Mobil, DuPont. And despite the fact that those 10 companies were the absolute giants of their time, there has been pretty significant turnover at the top. The current (2014) top 10 are: WalMart, Exxon, Chevron, Berkshire Hathaway, Apple, Philips 66, General Motors, Ford, General Electric and Valero Energy. As you can see, only 3 of 10 have maintained their place at the head of the list, reinforcing Darwin’s unintentional point about corporate survival.
Of the 7 no longer in the top 10, their fate was as follows:
- US Steel exists, but no longer in Fortune 500
- Esmark is a mid size company with $400 mm in revenue and no longer qualifies for the list
- Chrysler went bankrupt and its assets were acquired by Fiat
- Armour and Company was sold and broken into parts
- Gulf Oil was merged into Standard Oil, which later became Chevron
- Mobil Oil was merged into Exxon
- DuPont has moved from #10 to #86 on the list
“I think it inevitably follows, that as new species in the course of time are formed through natural selection, others will become rarer and rarer, and finally extinct. The forms which stand in closest competition with those undergoing modification and improvement will naturally suffer most.”–Charles Darwin
Here are the healthcare companies that are included in the 2014 Fortune 500: Insurance:
- Insurance: United, WellPoint (Anthem), Aetna, Humana, Cigna, Centene, HealthNet, WellCare, Molina Healthcare
- Services: HCA, Community Health Systems, Tenet, DaVita Healthcare Partners, Universal Health Services, Vanguard Health, Kindred Healthcare, Express Scripts, Quest Diagnostics, Omnicare, LabCorp of America, Quintiles
- Medical Products: Abbott, Medtronic, Baxter, Stryker, Becton Dickinson, Boston Scientific, St. Jude
- Pharmaceutical: J&J, Pfizer, Merck, Eli Lilly, Abbvie, Amgen, Bristol Myers Squibb, Gilead, Biogen Mylan, Celgene, Allergan
- Wholesalers: McKesson, Cardinal, AmeriSource Bergen, Henry Schein, Owens & Minor
That’s 45 companies, almost 10% of the current Fortune 500. And if you go by history, some 86% of them are doomed to obscurity or worse if they don’t learn how to adjust to life after the giant asteroid hits earth, also known as the full implementation of the ACA and related market changes.
“It is always advisable to perceive clearly our ignorance.”—Charles Darwin
Many of these companies are making sincere attempts to modernize and modify their businesses to change with the times and avoid the fate of the Tyrannosaurus Rex, who ruled the earth until he was dis-intermediated by Uber, or something like that.
Insurance companies are trying to become technology and outsource service companies selling to providers. The provider companies are trying to become insurance companies or something akin to them, completing the do-si-do. The medtech and pharma companies are trying to adopt technology and services models to augment their relationships with consumers or otherwise turn themselves into consumer products companies. The wholesalers are trying to become big data businesses.
Everyone in healthcare is betting on technology as the answer while, ironically, the technology companies like Apple, Google and Oracle and Intuit are betting on healthcare. Whether this results in the tech companies becoming the new healthcare names on the list or, a giant cataclysmic self-cancelling exercise as healthcare and technology giants pass each other in the hallway remains to be seen. In some cases these former strangers—healthcare and technology companies—are collaborating to find their way off the road to Perdition and onto the road to the future, wherever that leads.
“In the long history of humankind (and animal kind, too) those who learned to collaborate and improvise most effectively have prevailed.”—Charles Darwin
In a time when every company is talking about innovation and transformation and disruption and [insert buzzword here], it will be essential for the giants to take these words seriously if they don’t want to be tomorrow’s history lesson. I was recently told by one of the very large entities on the healthcare Fortune 500 list that they were undertaking certain activities (challenges, accelerator sponsorship, etc.) in order to “check the innovation box,” thus completely minimizing the import of the undertakings. His company best be looking over its shoulder for a guy with a black hood and a scythe. Actually, if it’s a startup that’s coming to eat his lunch, it will probably be a guy with a black hoodie, but you get my point.
“We are always slow in admitting any great change of which we do not see the intermediate steps”—Charles Darwin
Note: a shorter version of this post also ran August 18, 2014 on PE Hub