Perspectives from ISB

Here’s how hard it is for a business to survive 50 years: only about 36 percent of them make it to their 10th birthday, and about 21 percent make it to their 20th anniversary, according to the U.S. Bureau of Labor Statistics.

There are many reasons why so few companies last. They expand too quickly or invest in the wrong things. Customers do not provide the needed cash flow. Investors refuse to fund them. They fail to anticipate changes in markets and technology. A visionary founder retires or dies and no one has been groomed to take his or her place.

Pittsburgh has several prominent companies that passed the 50-year marker long before many of today’s hot companies were launched. They survived only because they transformed themselves along the way.

“Growth is not an inevitable process for a firm. Many firms may speed up the process of failure by trying to grow,” said Oliver Hahl, who teaches organization behavior and theory strategy at Carnegie Mellon University.

Having a great idea is often not enough, said John Prescott, who teaches strategy and other subjects at the University of Pittsburgh. “Entrepreneurs have ideas, but not necessarily the managerial skills that makes businesses run on an ongoing basis,” he said.

Maintaining those managerial skills when a CEO leaves, dies or retires is a challenge for all businesses, but especially for those owned by families. In addition to succession planning, Mr. Minutolo at Robert Morris said family-owned businesses sometimes fail to bring in outside expertise when a problem demands it. They also can hesitate to lay off workers because of the close connection they have with them. Either mistake can be fatal, he said.

Dealing with the ups and downs of business and economic cycles is another challenge. Bryan Routledge, who teaches finance at Carnegie Mellon University, said “You have to figure out whether this is a short-term crisis or a long-term crisis and what to do about it”.

Globalization and technology are two other trends that can make surviving harder, according to Rich Lunak, president and CEO of Innovation Works, which has invested in more than 300 technology startups in the Pittsburgh region.

Mr. Minutolo said Pittsburgh is blessed with a strong crop of companies, public and private, that have reached or exceeded the 50-year milestone. He credits some of the success to the assistance that businesses, including family-owned ventures, can receive from small business and entrepreneurial centers at local colleges and universities and from organizations such as Innovation Works. Loyalty to hometown companies is another reason.

Source: Boselovic, Len., Pittsburgh Post-Gazette, December 19, 2016;

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