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THE LIVING COMPANY by Arie de Geus

THE LIVING COMPANY by Arie de Geus. Who is Arie de Geus?. Arie de Geus make unique contributions to manage-ment thinking because the source of their thinking is experience rather than concepts Arie de Geus worked for Royal Dutch/Shell for 38 years, from 1951 to 1989

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THE LIVING COMPANY by Arie de Geus

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  1. THE LIVING COMPANYby Arie de Geus

  2. Who is Arie de Geus? • Arie de Geus make unique contributions to manage-ment thinking because the source of their thinking is experience rather than concepts • Arie de Geus worked for Royal Dutch/Shell for 38 years, from 1951 to 1989 • Chairman of Netherlands – British Chamber of Commerce from 1981 - 1988 • The Queen of Netherlands appointed him an Officer as the order of Orange Nessau in 1988 • Head of an Advisory Group To The World Bankfrom 1990 – 1993 • Advised many government and private institution , lecture throughout the world. • The author include on influential in the Harvard Business Review article "Planning as Learning" • He is a visiting fellow at London Business School • Board member of the Nijenrode Learning Centrein the Netherlands.

  3. ECONOMIC COMPANIES VS. LIVING COMPANIES

  4. ECONOMIC COMPANIES VS. LIVING COMPANIES Arie de Geus identifies two different types of commercial companies in existence today, distinguished, among other factors, by their primary reason for being in business. To explain the difference, de Geus borrows from evolutionary theory

  5. ONLY LIVING BEINGS LEARN • Play and learn • The “persona” represent body and soul together • - Goal Oriented, it want live as long as possible and realize • the development of its potential from its talent and aptitudes • - Conscious of Itself, a persona can perceive itself as “I”, • although it is composed of parts of elements, which are • personae in their own right • - Open To The Outside World, element from the outside-such • as food, bacteria, dust, light, and sound constantly enter • the human system. At the same time, s persona is constant • relationship with the outside world, in the sense that • every experience represents one more exchange in lifelong • dialogue with the force of the world around it • - Alive, But Finite Lifespan, one day it is born and one day it • will pass away

  6. LIFESPAN OF A COMPANY • Average life expectancy of Fortune 500 Company is 40-50 years. • 1/3 of Fortune 500 companies in 1970 had vanished by 1983. (13 years!) • Recent study 1996 Stratix consulting group - Amsterdam - average life expectancy of all firms, regardless of size, is 12.5 years (Japan and Europe).

  7. Features of Long Lived Companies • Shell study of companies older than Shell (.100 years) 27 in detail, of 40. Why did they survive? • 1. Sensitive to their environment (in harmony with the world around • them – tuned to what was going on). • 2. Cohesive, with a strong sense of identity. (People felt part of them • - community • - managers chosen from within - "stewards"). • 3. Tolerant (of activities on the margin - experiments, ccentricities... • - did not exert overly centralised control). • 4. Conservative in financing (frugal, money in land – could • pursue options their competitors could not)

  8. Memory of the Future How do companies anticipate the need for change? Why doesn’t a company see what is happening? • Managers are stupid • We can only see when a crisis opens our eyes • We can only see what we have already experienced • We cannot see what is emotionally difficult to see • We can only see what is relevant to our view of the future

  9. Prediction Planning Scenario Planning Learning Processes • Insatiable Demand for Predictions • Management View take s future as “Falistically” given • Producing Uncertainty trough prediction • Anticipating possible future and preparing for them

  10. DECISION MAKING AS A LEARNING ACTIVITY Perceiving Acting Embedding Concluding Learning by Assimilation Vs Learning by Accommodation

  11. FLOCKING The Titmouse and the Milk Bottle • Innovation as individuals or community • Social propagation - established process for transmitting a skill from individual to company • Mobility - individuals move around rather than settling in isolated territories

  12. The Tolerant Company • Tolerance wastes resources • Letting things “happen” at the margin • Diversification by tolerance vs diversification by • Dictum • Parable of Chilean Potato • Intolerant companies live long and do well IF they have control over the world they live in

  13. The Corporate Immune System • Corporate body, like human body, needs immune system • Limit to openness and tolerance • Mergers and acquisitions… - like infections - failure rates around 50-75% (Porter) • Parasites Can exist anywhere in corporate host body • Members will retire, whereas parasites will serve for their own sweet time and leave by different route. • Money is not enough of an incentive but money needs a lot of attention in a living company

  14. Conservatism in Financing • Money is important • Entrepreneurs with high debt/low equity • underperforms • Long lived companies have money in hand • “Stewards, not gamblers” • Long term survivor does not define life in economic terms, but in evolutionary terms • Cost of “company deaths”

  15. CONCLUSION • Profit is not a guarantee for a long live company but it is the symptom for a health company • You will still not have institutional learning until you develop the ability to flock that needs two criteria: mobility of people and mechanism of social transmission • The decision for action made by this living being result from a learning process • Company should not all live forever, but a reduction corporate mortality seem advantageous • Any movement to the philosophy of the living company will take time, it will evolutionary rather than revolutionary

  16. BOOK REVIEW COMPETING FOR THE FUTURE (1994) Gary Hamel and C.K Prahalad“KNOWLEDEGE” GOOD TO GREAT(2001) Jims Collins“LEVEL 5 LEADERSHIP” THE LIVING COMPANY (1996) Arie de Geus “THE COMPANY IS A LIVING BEING” THE FIFTH DICIPLINE (1990) Peter M Sange“THE LEARNING ORGANIZATION” BUILT TO LAST (1994) Jims Collins and Jerry I.Porras “ CULTURE AND DICIPLINE”

  17. THANK YOU FOR YOUR KIND ATTENTION

  18. COMPETING FOR THE FUTURE (1994) Gary Hamel and C.K Prahalad“KNOWLEDEGE”

  19. Managing for Profit or Longevity Is there a choice? • Economic or “puddle” company - a viable choice - hard to be a learning organisation • Living or “river” company - high/low (flow) but permanent - self perpetuating, maintains identity - ROI still important

  20. Managing for Profit or Longevity • Is there a choice? • Economic or “puddle” company • - a viable choice • - hard to be a learning organisation • Living or “river” company • - high/low (flow) but permanent • - self perpetuating, maintains identity • - ROI still important

  21. Economic Companies vs. Living Companies

  22. http://strategic-manage.com/?p=21

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