Harvard Business School Press
A long and prosperous life is one of humankind’s most cherished ideals. Since the dawn of time, we have sought the elixir of longevity for ourselves, but what about our organizations? How can ensure that companies – the very legacy of our social and economic endeavors – thrive across the centuries?
Most companies do not survive the upheavals of change and competition over the long haul: the average life expectancy of a multinational company – in the Fortune 500 or its equivalent – is between 40 and 50 years. There are a few remarkable examples of firms that have withstood the test of several centuries. What hidden lessons do they hold for the rest of us? In The Living Company, the man who introduced the revolutionary concept of the learning organization has turned his attention to identifying the critical characteristics of organizational longevity.
Arie de Geus reveals the keys to managing for a long and prosperous organizational life. He draws a sharp distinction between “living companies,” the purpose of which is to fulfil their potential and perpetuate themselves as ongoing communities, and “economic companies,” which are in the business solely to produce wealth for small group of individuals. He shows clearly that living companies manage for survival, economic companies manage for profit.
With nearly 40 years of experience at Royal Dutch/Shell, where he was involved first-hand with implementing the renowned scenario planning technique, de Geus describes how he came to explore and understand the special qualities of living companies. Among a wide array of important factors, long-lived companies have for essential traits in common. At a minimum, these firms are:
- Sensitive to their environment in order to learn and adapt
- Cohesive, with a strong sense of identity
- Tolerant of unconventional thinking and experimentation
- Conservative in financial policy to retain the resources that allow for flexibility
The Living Company speaks not just to senior executives and aspiring leaders but to everyone trying to adapt to a turbulent business environment. Only those steeped in the habits of a living company will survive.
Arie de Geus worked for Royal Dutch/Shell for 38 years. Widely credited with originating the concept of the learning organization, he is a visiting fellow at the London Business School and the Board member of the MIT Center for Organizational Learning.