Capital decay definition
/What is Capital Decay?
Capital decay is an organization's sales that are lost due to the obsolescence of its business practices or technology. This is a particular concern for organizations that are locked into older business models; if they do not innovate to keep up with their newer competitors, they run the risk of losing substantial amounts of business, or even of going bankrupt. Capital decay is a major problem in industries where product cycles are short or the barriers to entry are low.
How to Avoid Capital Decay
The best ways to avoid capital decay are to foster a culture of innovation within a business, as well as to constantly invest more funds in the firm, replacing less efficient equipment.