Lest you topple…

Topple rate is a measure that a McKinsey consultant devised in 2007. It measures the rate at which companies lose their leadership position or switch ranks. The ranking in this context is done on the basis of return on assets (ROA). For example, if the topple rate is 40%, it means that if you an industry leader, there is a 40% chance that you will lose your position to another firm in a given year. The topple rate is also a measure of the ability of a company to sustain its competitive advantage.

A study published by Deloitte (The Shift Index-Measuring the forces of long term change) reports that between 1965 and 2010, the topple rates of US companies with turnovers of greater than $100million rose by 40%. Additionally, they reported an upward trend in labour productivity and competitive intensity, but a downward trend in return on assets.

The topple rates across different industries varied over the years indicating that there are no “safe” industries with topple rates consistently lower than average.

I have not seen any study/ statistic that shows topple rates of companies in India, but there is enough anecdotal evidence suggesting that there has been a churn in the top companies in many industries such as banking, finance, auto, telecom, insurance, and so on, in the last couple of decades.

Maintaining a competitive advantage is among the top objectives of leading companies. And gaining it is on the minds of those not already among the leaders. Competitive intelligence (CI) is key for achieving this.

And yet, according to a recent survey by Frost that I came across, CI is not among the top 5 tools used by CEOs to improve business performance.

Why do you think this is so?