What are the life cycles of Value Chains?
The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased from 67 years in the 1920s to just 15 years in 2012. It is expected that the majority of the S&P 500 in 8 years’ time will be companies that we have not heard of yet. Many of the big dinosaurs of previous decades are struggling to keep up with new innovative entrants and are facing the challenge of radically changing their business models.
Business Models of Innovators and Mature Businesses
The business models of innovative fast-growing companies at the early stages of development are different than the business models of mature companies. In general, the business models of fast-growing companies are oriented primarily to how the company shapes, delivers and captures value from the market in order to increase the value of the company and generate profits for shareholders. On the other hand, the business models of mature companies focus on balancing objectives with respect to different groups of stakeholders. The governance of these companies tends to be more bureaucratic, making them less agile.
Examples of Value Chain Life Cycles
Due to the rapid growth of digitization in recent years, we can observe rapid shifts across all industries. Examples of this include Airbnb disrupting the hotel sector, Uber in the hire car industry, and Youtube and Spotify disrupting the music industry. Similarly, many organizations have been forced to rapidly change their industry focus, for example Phillips shifting to healthcare and ING Bank becoming a FinTech organization. Another notable company is Apple, which has been able to adapt the typical product life cycle of its smartphones, laptops, and tablets to a lifestyle life cycle.
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