“The Living Company” by Arie De Geus Harvard Business Review (March 1997) Presented By: Takbir Ahmed Biswas Lynn Blankenstein Lexi Gray Norawit (Travis)

““The Living The Living Company”Company”by Arie De Geusby Arie De Geus

Harvard Business Review (March Harvard Business Review (March 1997)1997)Presented By:

Takbir Ahmed BiswasLynn BlankensteinLexi GrayNorawit (Travis) VirunkitkosonYixiong (Kyle) Zou

What is a corporation?What is a corporation?

• Defined as:

“a large company or group of companies, recognized by law as a single unit.” ~Oxford Dictionary

• Described as:

An organization that is viewed as a “community of human beings that is in business – any business – to stay alive.” ~De Geus

What is a living What is a living company?company?

Life Expectancy of a Life Expectancy of a corporationcorporation

• Average life span is less than 20 years

• Examples that show that a corporation can be in business for as long as several hundred years

Why is there such a Why is there such a discrepancy?discrepancy?

• “Living companies produce goods and services to earn their keep in the same way that individuals have jobs in order to live”

~De Geus

Living CompaniesLiving Companies

•Very good at managing for change in the marketplace

•Understand:–Who they are–How they fit into the world–The value of new ideas and people

Conservatism in FinancingConservatism in FinancingWhy do they survive so long?

•Concern about “Safety” of Capital

•Avoidance of unnecessary expenses

•Belief in the Value of money in Old fashioned way

•Tendency of saving extra cash as back-up to avoid investors

Sensitivity to the World Around Sensitivity to the World Around ThemThem

•Adaptable to changes•Forecasting of future•Comparison of Past, Present

and Future•Reaction to “Whatever was

going on”.

Awareness of Their Awareness of Their IdentityIdentity

• Employees felt like Parts of a Whole

• “Fleet of Ships”• Managers in the Living

Companies were chosen mostly from within

• The First Priority: To maintain the company’s health

Tolerance of New IdeasTolerance of New Ideas

• The Manager must:The Manager must:– Understand the values and Understand the values and

traditions of the companytraditions of the company– Keep the company aliveKeep the company alive– Let people grow within the Let people grow within the

communitycommunity– Place commitment to people before Place commitment to people before

assetsassets

Valuing People, Not Valuing People, Not AssetsAssets

• 27 long lived companies changed business at least once

• Scuttle assets to survive• Assets and Profits are

necessary, but not purpose of life

Valuing People, Not Assets Valuing People, Not Assets (2)(2)

• Companies with different model• Scuttle people to survive• Purpose: to make profits for

shareholders• If in trouble, get rid of people

Loosening Steering and Loosening Steering and ControlControl

Managers must:• Heed opinions and practices of

other people• Give people space to develop

ideas • Take risks with people

Loosening Steering and Control Loosening Steering and Control (2)(2)

Metaphor of Rose Gardening• Prune roses: hard or long ?• Hard: have the biggest roses in

neighbourhood in June (high risk)

• Long: have roses in every June

Why learning is essential

• Circumstances change• Living companies also

change

Organizing for LearningOrganizing for Learning

Conditions of organizational Conditions of organizational learninglearning

• Numerous individuals• Some of whom are

innovative• System supports

Organizing for Learning (2)Organizing for Learning (2)

How living organizations How living organizations learnlearn

• Birds that flock learn faster

• Developing programs

Organizing for Learning (3)Organizing for Learning (3)

The Human ElementThe Human Element

• It is a choice

• Focus on going from one generation to the next

• Level of involvement and a sense of belonging are important

Puddles or Rivers?Puddles or Rivers?

• A company must focus on smooth transitions between generations

• People need to enter and exit the company with the right understanding

• Need to be able to let go and understand ‘fit’

Passing the BatonPassing the Baton

• Strict exit rules

• Stewardship is important as one person exits and another comes in

• Important to understand the nature of the company

ConclusionConclusion

• Mobilizing the disposable intelligence

• High levels of tolerance are important

• Important to brain-rich and asset-rich companies

• Corporate death causes many to feel a loss

QuestionsQuestions??