If you’re old enough, cast your mind back 20 years. The biggest companies in the US in the year 2000 were the likes of General Motors and Wal-Mart. Exxon Mobil and AT&T. This is no surprise – that year’s top ten (below) was a collection of household names that speaks of longevity, business strength… perhaps even of permanence.
But when we look at the top of the Fortune 500 today it’s striking how little remains unchanged. There are only two companies that have retained their position at the top of the table. All the others have found their businesses overtaken by opposition that is more fleet of foot, or is riding a financial or technological wave that these industrial giants found themselves unable to catch.
This graph shows how the most valuable companies in the US have evolved over the past two decades:
Data extracted from https://fortune.com/fortune500/
The falls from grace of General Motors, Ford and General Electric show the dangers of complacency and of an inability to adapt. This period has seen the disruptions to business of the dotcom crash, the financial crisis and the recent coronavirus recession. It may be possible to persuade oneself that the next two decades could – surely – not threaten a similar level of upheaval. Unfortunately, the reverse is probably true.
It's time to put the digital freak at the heart of energy transitions.
The accelerating climate breakdown is threatening to unleash chaos in supply chains. The resultant migratory pressures have unsettled governments from Syria to the UK. The most dynamic companies in the world are no longer exclusively American and there is a persistent shift of business towards the East and the South.
It seems highly likely that in 20 years’ time the chart above will look even more chaotic. The industrial entities that have achieved greatness through their ownership or exploitation of fossil fuels will adapt or die, swept aside by regulations that start by doing too little for too long, before suddenly over-correcting. It is no hyperbole to say that businesses currently sitting at the top of the pile could find themselves fighting for business survival, as corporate targets suddenly get set to zero (or even below, as in this example from Microsoft).
If history teaches us anything, it is that change can be imperceptible – it can be nothing – until suddenly it is everything. When external events start to shake the tree, large branches fall; the business impacts of climate breakdown are going to be some of the biggest in human history.
Against this background, it’s interesting to see how some of the winners and also-rans of the 21st Century business race are already shaping up. In this article Vestas Wind Systems shows growth of 15x since it was incorporated just before the turn of the century. At the same time BP (a $78B giant) stated its aim of going ‘Beyond Petroleum’ – a business pivot that proved completely beyond it at the time.
Back in 2000, BP could have gone green cheaply by swallowing Vestas. It was worth over 100 times more than the Danish company. Now, the ratio is closer to 2.5.
The smart money got into wind and solar early. Electricity generation is finally beginning to decarbonise as a result, driven by reduced costs and more consistent operating margins. The next wave of business change will come from the efficient application of this cheap, clean electricity to displace carbon fuels from every energy intensive industry – from ammonia to cement and from paper to protein. The manner in which petrostates such as Saudi Arabia are going all-in for renewables and green hydrogen gives an indication of the scale of change at work; we are living in interesting times.
Just as the Fortune 500 has shifted away from ‘big iron’ and towards information, retail and financialisation so the coming decade will see emergent companies continue these trends into enabling net zero emissions of carbon. We are not talking here about ‘managing a declining asset’ nor is the focus any longer on operational or energy ‘efficiency’.
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Twenty-first century businesses will be growing and diversifying by leveraging the ‘infinite’ energy source that is wind and solar power. The companies that survive this transition will do so not just by swapping their energy provider, but by restructuring the energy consumption patterns of their business in order to increase productivity, at the same time as driving to zero carbon emissions.
The next key energy battleground will concern the way that distributed electricity sources displace fossils in the big emission centres of heating and transportation. This requires a strategic shift, and a blend of engineering and financialisation. We will see an evolution away from the simple Internet of Things towards the emerging "Economy of Things" as I discuss further in this article.
