Worldwide increase in big bankruptcies

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The number of big companies that filed for bankruptcy has increased with 22% worldwide in 2017. Big companies in this case, means those that have a turnover of more than 50 million. The total turnover of these 321 companies was 104 billion Euro. And this year, a further increase of 8% is expected.

The cause

Apart from sector specific causes, there is a bigger main cause: technological change keeps accelerating. Companies that have a hard time adapting to technological changes face a much higher chance of going bankrupt within the next few years.

What makes this situation even more problematic is the low interest rate. Many companies have taken on loans against very low interest rates. But if these loans aren’t being invested in the right business models, it will be extremely unlikely that these loans can ever be paid back.

Big companies have a tendency to focus on the short term, for example to please shareholders. Investing money in innovation can often lead to a temporary setback, which is hard to sell to shareholders.

Innovation is a mindset

In my opinion, companies should adopt an innovative mindset. That doesn’t mean that they should strive to be the next Tesla, or venture into research they don’t understand.

What they should do is the opposite of what they often do now: sit back and enjoy the revenue stream of their products or services. And that means companies should look for ways to improve.

Improve on products, services, internal processes. Everything. And that improvement only needs to be 1% per day. If a company can improve just 1% per day, whether it is on revenue, customer experience or efficiency, that company makes a giant leap every single year.

But more importantly, when people are taught to work with the mindset of finding improvement everywhere, they will actually start seeing these opportunities. The problem isn’t that the companies that went bankrupt last year didn’t have the opportunity to improve, it’s that they didn’t see it.

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