Why a volatile fast changing world is good for Hong Kong

The average lifespan of a multinational (Fortune 500) company is 40 years. Of today’s Fortune 500, only 67 still exist from the first list published in 1955. Last week 133 year old Kodak filed for bankruptcy protection; in its 1980 heydays it employed 145,000 people, had great products (it even invented the digital camera) and its brand belonged to the most valuable in the world. Too slow to change to the digital world, decades of decline ended in a slow, but certain death.

In a recent study that TNS conducted with CMOs of 30 multinationals about digital and marketing, the CMOs recognized the necessity of speed and change, as they mentioned the imperatives for 2012:

1. Digital engagement and the brand idea – deeper consumer engagement through a renewed focus on the central ‘brand idea’;
2. Analytics to make data work harder – digital data streams need to work harder; to generate insights, improve targeting and deepen engagement;
3. Speed of execution and organisational change – ‘digital is the new norm’ and integration with the CMOs remit often catalyses digital’s role as a broader business enabler.

This is bad news for many companies; while they recognize the need for speed, there is a long list of companies struggling to adapt to a changing world, several of which will disappear in the coming decades.

Of course there are exceptions and IBM is arguably the best example. In 1993, IBM was an ailing giant close to a spectacular death, a company employing 300,000 people and once the pride of the USA. Louis Gerstner managed to turn it around, and he says of his historic business achievement: “The prevailing wisdom is that small companies are fast, entrepreneurial, responsive and effective. Large companies are slow, bureaucratic, unresponsive and ineffective. This is pure nonsense – I have never seen a small company that did not want to become a big company. It isn’t a question of whether elephants can prevail over ants. It is a question of whether a particular elephant can dance. If it can, the ants must leave the dance floor”. Gerstner has every right to say this; IBM reclaimed its lost territory and last week its stock closed at an all time high of US$ 192, from just $13 in 1993. However there are not many elephants left in the modern world and hardly any of them can dance to the tunes of social media, the digital marketing weapons of entrepreneurial ants.

Jack Welch, another entrepreneurial icon, once said: “If the rate of change in an institution is slower than the rate of change outside, then the end is in sight”.

This is good news for Hong Kong, with the fastest bureaucracy and most entrepreneurial workers in the world, all mobile and digitally connected. Hong Kong has a workforce of 2.6 million people and 345,000 companies of which 88% employ less than 5 staff. It has been estimated that for every job lost in a Fortune 500 company, 2 are created by small companies, so while it is not good news that HSBC is shedding 3,000 jobs, on an aggregate level we should not worry too much either. Speed and adaptability to change is the most important factor to survival and Hong Kong will keep thriving as long as it changes faster than its competitive environment.