It is commonly said that competition is getting more intense. Is that true? Yes but not because more companies are being formed but because the largest players are getting more entrenched.
Based on the latest research, companies are less successful compared to the past, there is more concentration in most industries, and startup rates are falling. We believe that because of the entrenchment of top companies, smaller companies are facing stronger rivals and it is getting harder to start new companies.
Companies are having a harder time staying successful
Companies are staying in the S&P 500 for shorter time spans
There has been a decline since the 1980s in the average time a company remained on the S&P 500 Index. The lifespan of companies is decreasing and among a few other factors, this change can be attributed to increased competition and technological innovation.
Companies are staying shorter time spans as industry leaders
BCG’s analysis below highlights how companies are falling from leadership positions faster compared to the past.
Symptoms of increased competition
Dominant leaders such as Amazon, Apple, Google have entrenched their position in the market. This leads to a more concentrated market. Brookings’ graph below shows that every industry got more concentrated between 1997 and 2012 besides healthcare and education.
Decline in Market Entry Rate
In the US, the firm formation rate has a declining trend. In late 70s, almost 15% of all firms were new firms. In 2015, the entry rate fell to around 8%.
Other observations also confirm this. As seen below on Hamilton Project graph, the start-up rate per industry is rapidly decreasing for each sector. For example, in case of retail, the start-up rate (as a percentage of all firms within the industry) fell from 12% to a little more than 5%.
Companies need to make the best use of technology to survive in these conditions. Here are our articles that contain useful and actionable insights into digital transformation and analytics to help companies chart their way to success:
- Digital Transformation: In-Depth guide for Executives
- AI Transformation: In-Depth guide for executives
- Exploring Analytics & AI: A Detailed Primer
If you still have questions, we can help:
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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