You’ve got to marvel at how tech giants have come to dominate the S&P. You have to dig way down to number seven by market cap before you hit a non-tech company. In case you’re wondering, that would be Berkshire Hathaway, with Johnson & Johnson, Exxon Mobil and JPMorgan rounding out the top 10.

The reasons for that ever-growing gap are not as straightforward as you’d think. Granted, technology is disrupting every industry on Earth, but a much less talked-about aspect of juggernauts like Apple, Google, Microsoft, Facebook and Amazon is the way they’re organized and run.

To say they’re different from the industrial giants of yore is like saying humans are different than, well, dinosaurs.

Today’s tech companies are much leaner and more focused. Their organizations are far flatter and less bureaucratic. And they actually do corporate governance right: Their executives are incentivized to move fast and take risks, not sit on their butts and get rich. That’s no coincidence. It’s by design. Being lean and adaptive is in their DNA.

Take GE’s recent meltdown. ICYMI, shares of the industrial giant are in free fall, down nearly 15% since Monday and more than 40% year-to-date. Why? The conglomerate has been mismanaged for ages. It has no strategic focus or synergies. It’s mired in debt. And its organization is a top-heavy relic with pricey pension obligations.

Former CEO Jeff Immelt – with his layer upon layer of high-paid executives and 18 board directors – ran the company into the ground. No wonder. They all made big bucks just for showing up and sticking around … and coming up with silly slogans like “Imagination at Work.” And current CEO John Flannery is just more of the same.

In terms of everything that matters – strategy, products and organization – GE is a dinosaur. And you know what happened to them. They’re buried under layer upon layer of decomposed matter and sedimentary material – just like GE.

The media gives Amazon CEO Jeff Bezos a hard time for creating an uber-competitive culture he calls purposeful Darwinism. I challenge anyone to come up with a better blueprint for an organization that’s built to adapt and thrive in a highly competitive global market. It’s a damn good metaphor, when you think about it.

You see, corporations have the potential to live and be productive far longer than people. GE has been around for 125 years. The problem is, markets don’t stand still, they change and grow, sometimes surprisingly fast. And if a company’s growth does not consistently outpace the market, it will lose share and eventually go the way of the dinosaur.

Time will tell if today’s tech giants are built to survive over the long haul. Their cultures certainly seem to be designed for continuous innovation and market disruption. But then, you know how it is with organizations of man: There’s always that unpredictable human factor. In other words, you just never know.

Image credit Katherine Kirkland via Flickr

  • Barry Duck

    Where do I begin, why do companies pay these CEO’s big salaries for not producing or meeting any kind of goals. The board brings in a new CEO and he runs the company into the ground and they give them a big bonus. Then they leave and everything is going to hell. They come in and spend big bucks on PC training for all of the people, and you are scared to even speak to people because someone may say you harassed or hurt their feelings. Then hurting someones feelings is worse than not doing your job. Crazy!

  • Danny

    You are exactly right about the aspect of what is not discussed concerning those companies. I think that is because most business people really do not understand what it take to be a successful tech company. Having spent most of my working life associated with tech companies in one way or another, I feel tech companies are a totally different breed than non-tech companies, and as such they are much more dynamic and difficult to run and manage. Every aspect of tech companies happens at warp speed vs a non-tech company, and therefore the management styles and methods of executives who grew up in a non-tech industry would never work in a tech environment. One year in the life of a tech company is like 7 years in the life a non-tech environment. Managing a long-term successful tech company vs a non-tech company is like comparing the NFL level of play with high school football. Guys like Jeff Immelt would have been gone in 2 years, or less, in a high tech company instead of 20 years, or however long he lasted at GE. Part of GE is certainly based on technology, but they are old line businesses, and managed as such, but GE has not been successful with their ventures into new high technologies, for the reasons you stated. The fact that the mentioned companies have lasted as long as they have is a huge achievement. They may turn out to be Dinosaurs, time will tell, but in the mean time, they can’t be judged or predicted based on the same criteria as non-tech companies.

  • Brad

    I believe Jack Welch was a phenom often misunderstood. He transformed GE to help it create its next act. The bigger issue, that many face and fail at, is what do you do for an encore (i.e. succession). Jeff Immelt was the heir and a lot invested in him and he was doomed. Why? He went down the path trying to protect the base and build the future of which he accomplished neither; he could never be Jack II…..and got a fat payout which is indeed unjust, oddly enough for everyone including him. Changing environments, regardless of industry, are challenging to navigate; many try, many fail. Google, Facebook, SnapChat, the next darling everyone fawns over will inevitably need to face that they too will become ordinary and have to adapt to remain relevant or get buried under their own weight and the weight of time and become the fuel of the next epoch.

    • Steve Tobak

      Well said. I think the key is to build adaptability / risk taking / competitive spirit into the company’s culture so it becomes part of the DNA. That changes things. The way these tech giants are run today is sort of like a beneficial genetic mutation for organizations that just might improve their survivability potential. Time will tell.

  • Anurodh Sharma

    One never knows the future is true Steve. Purposeful Darwinism. ……. To err is human…. to err unknowingly maybe human but to err knowingly is downright cunning!!!