“Fifty years ago, “milking the cash cow” could go on for many decades. What’s different today is that globalization and the shift in power in the marketplace from buyer to seller is dramatically shortening the life expectancy of firms that are merely milking their cash cows. Half a century ago, the life expectancy of a firm in the Fortune 500 was around 75 years. Now it’s less than 15 years and declining even further.
Why do managers keep on this path that is systematically killing their firm? For one reason, it’s more difficult to add value than to cut costs. For another, the executives have found ways to reward themselves lavishly. As Upton Sinclair has noted, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
