In their book, "Built to Last: Successful Habits of Visionary Companies," management consultants Jim Collins and Jerry I. Porras closely examined several successful businesses.

Their goal?:

Learn why they had become such long-lasting companies that thrived in their respective industries.

The pair carefully studied these organizations’ evolution — from startup, to enterprise, to Fortune 500 — and noted what qualities they saw in the leaders of those companies.

The harsh truth about the renowned businesses featured in the book — Walmart, 3M, Merck, and the like — is that they are increasingly anomalies with each passing year.

Innosight’s latest Corporate Longevity Forecast shows the average lifespan of S&P 500 organizations is slowly but surely decreasing over time:

From an average "tenure” of 40 years to half that, as of 2024

The report found that some of this decline can be attributed to the recent global pandemic and the economic downturn it then caused. But there are other factors at play.

“Although it’s easier than ever to launch new startups, fewer are being launched than we should expect, and those that do aren’t surviving as long as they should,” High Alpha Innovation CEO Elliott Parker explained at Alloy, our annual Venture-Building Summit.

“Shorter company lifespans translate, in most cases, to fewer problems being solved, less impact, and less advancement because those companies, once they scale, have less time to get things done,” Elliott added.

So, this begs the question: How can companies endure and build a lasting legacy?

Why we need more companies to thrive long term as a society

Poor business planning and timing. A redundant product or service that fails to stand out. Insufficient financing to support growth plans. Getting leapfrogged by competitors.

The list of reasons why businesses fail is a fairly long one.

As Elliott noted at Alloy, though, the common thread among poor-performing (and eventually shuttered) businesses is simply a lack of money.

“The world’s most enduring institutions are hyper-conservative about fiscal matters,” said Elliott. “They take very little risk. They can afford to be safe, because they’re typically very tightly held and not worried about short-term growth.”

In the case of companies at least 100 years old, Elliott added they tend to have at least a couple years’ worth of cash on hand to survive economic headwinds.

Of course, it’s not just being mission-driven and sticking to financial principles that determines a company's success.

By constantly analyzing existing operations and market opportunities and collaborating with the right partners, corporations greatly enhance their odds of not just surviving near term, but also thriving long term.

“I believe that, for most companies, endurance is a better goal than short-term profit maximization,” said Elliott. “Even if cash flow is the most important measure of a company’s success, sustained cash flow generation over centuries, even if at a meager rate annually, is likely more desirable than a short-term spike and crash.”

And the way to realize that endurance is by testing new ideas that can strengthen the core business and concepts that can lead to the creation of new companies.

What lessons can be learned from these long-lasting businesses

Elliott explained the secret to outlasting the competition boils down to three things:

1. Testing all the time. “And every time you discover an anomaly, something unexpected, you’ve possibly learned something before the rest of the world. Enduring companies are like living organisms that must learn, that must expand their knowledge base to survive.”‍
2. Creating a firm succession plan. “Institutions are more likely to endure when their founding requires the efforts of multiple generations. … A small group of people can start construction of a cathedral, but it requires a large group of people, sometimes over hundreds of years, to finish the job.”‍
3. Setting lofty but reasonable goals. “I’m not suggesting you should be modest in your objectives. … I’m suggesting that you should be audacious in your objectives but conservative in your timelines.”

Regarding this latter point, Elliott spotlighted Birkenstock. He noted how the company’s roots go all the way back to 18th-century Germany.

That longevity may seem unachievable to many entrepreneurs today. But the shoe producer even states the formula for its success is simple:

“Since 1774, Birkenstock has passed this commitment down from one generation to the next. The result is the absolute best in quality, comfort and support."

That 250-year-old business pales in comparison to another Elliott covered: Kongō Gumi, a Japanese construction company founded in 578 A.D. that lasted 1,400 years.

“The company exhibited tremendous flexibility in how it chose its leaders, selecting the son who showed the most potential to succeed in the job, or son-in-law if there was no son,” said Elliott. “Eventually daughters were allowed to run the business too, fortunately.”

Succession was a careful choice for Kongō Gumi, not just a default to the right of primogeniture, Elliott added. Family members over generations were trained and empowered as needed.

The business was eventually acquired in 2006, due to debt burdens. But its story is a powerful one for current and aspiring founders looking to play the long game.

“Game theory teaches us that when we play finite games, we optimize for our own outcome because there is no threat of repercussions,” said Elliott. “When we play infinite games, we must optimize for all stakeholders to keep playing the game.

"Too many forget that business should be an infinite game."

How a proven venture builder can help scaled organizations endure

Executives looking to validate proofs of concept for spinoff companies. University leaders with funds to support startup creation. State economic development offices with federal funds and grants at their disposal to help launch new businesses in their areas.

Partnering with an external venture builder to unlock growth and transformation internally can enable all three audiences to build new companies and realize their goals.

• For universities, that could be to better attract and retain talent and students.
• For states, that could mean building entrepreneurial ecosystems in their regions.
• For corporations, that often means helping their businesses thrive long term.

High Alpha Innovation's team of venture-building experts collaborates with our partners to:

• Align on short- and long-term innovation investment opportunities
• Define the problems facing audiences they want to potentially serve
• Speak with consumers and customers to secure qualitative feedback
• Move quickly on agreed-upon concepts to test and validate their potential
• Establish delivery and economic models upon business venture selection
• Launch companies that have the chance to excel 'today' and 'tomorrow'

It's through this structured process that all three organizations can realize their goals and ROI.

In the case of corporations, they can future-proof their core business by creating new companies at scale with a venture studio and sustain for decades — if not centuries.

“Building companies with enduring impact is really, really hard,” said Elliott. “It’s a big reason why High Alpha Innovation exists. We believe there should be more entrepreneurs in the world, and that more of them should succeed. We believe that, when startups and large institutions collaborate effectively, the world is better off.”