Living Company Harvard Business Review

Living Company

De Geus, Arie. (2002). The Living Company. Boston: Harvard Business School Publishing.

Instead of being a typical management book on what should and should not be done to perpetuate the status quo, author Arie de Geus drew on his experiences within Royal Dutch/Shell, research from biologists and psychologists, and the study of multinational corporations or companies with a great deal of longevity. Instead, De Geus believes that companies that want to succeed commit to develop all their employees at all career stages to their maximum potential. The four major principles to this are:

Sensitivity to the corporate environment -- Long-lived companies pay attention, learn, adapt, and evolve as circumstances require.

Persona -- Successful organizations are cohesive and have a strong sense of identity that helps them build a shared community.

Tolerance -- These successes are patient, typically more decentralized, less hierarchical, and give a wider spread of decision making authority, but are tolerant of non-core activities, dissent, and changing paradigms.

Frugality -- These organizations are fiscally conservative, but not selfish; Instead, they invest in their own growth and prefer to use options instead of being forced into compliance.

Chapter Title -- The Lifespan of a Company

Chapter Summation -- Successful organizations have been the lifeblood of Western Civilization for the last 500 years. Yet, most companies never really grow to realize their full potential. The few companies that have lasted for hundreds of years have many

Definitions/Terms -- Global diversification: the ability to ensure the organization evolves as necessary in a climate of globalism, community of humans.

Integration of Knowledge -- Uses a multidisciplinary approach to integrate history, sociology, business, and psychology to form a broader picture of what the key elements are in successful organizations.

Evaluation of Presentation -- Author uses a socio-cultural, historical approach to define issues that allow certain organizations to exist over centuries, not decades. The author evaluates the success of companies in their longevity, since 40% or so fail within a failure rate of under ten years, on an international average. Really, what tends to happen, is that most companies fail to achieve what it is they are really capable of, instead relying on the status quo and short-term goals, or "because their managers focus on the economic activity of producing goods and services, and they forget that their organizations' true nature is that of a community of humans" (3). This begins our journey into what it takes to be successful in business, and the reasoning behind it.

Question -- Is there a relationship between the half-life of technology and the manner in which companies are or are not successful in evolving to the next phase of consumer needs?

Chapter Title -- The Shift from Capitalism to a Knowledge Society

Chapter Summation -- It is no longer necessary for the modern organization to choose either profit (usually quick profit) versus longevity. Both are interwoven since over the past several hundred years the global economy has shifted from the wealth of tangible goods (land, factories, etc.) to wealth from what people know about doing x, y, or z (knowledge).

Definitions/Terms -- Profit vs. longevity; knowledge economy, scarcity of production and resources, guilds and unions

Integration of Knowledge -- Integrate post-World War II economic and sociological theory (rising leisure class, more suburban, automobile, role of technology) into thesis about the way the new economy is set up.

Evaluation of Presentation -- Since knowledge is not always tangible, there must be a balance between human resource allocation and knowledge management. Thankfully, technological improvements have resulted in the ability to store and manage a great deal of information so that as human capital evolves (moves, expires, etc.) the actual knowledge of what makes the organization work is not lost. There are so many positives about the idea of knowledge management in the knowledge economy: easier training, longevity with the company and therefore the company itself, greater satisfaction with the job, greater contribution to the overall positive nature of society, which is win-win for all.

Question -- What tools are needed for a company to remain successful in a knowledge economy?

Chapter Title -- The Memory of the Future

Chapter Summation -- Learning is perception and we humans are particularly suited for cognitive communication and memory. Open, extroverted companies that encourage learning will succeed in the long run because they view life's foibles as challenges rather than

Integration of Knowledge -- The smart and successful organization has a hypothesis already in place -- a contingency plan integrating all facets of the organization, for what might happen if a portion, or all, of their resources run out or are interrupted in some manner. Technology changes, even faster now than 100 years ago. e. So too, do the companies of the early 21st century need to use their knowledge bank and human resources to not only understand the marketplace of today, but rather than exploiting dying industries as cash cows (e.g. yellow pages, etc.), invest into future growth and train and develop staff for future possibilities. By thinking forward, innovation becomes more commonplace.

Evaluation of Presentation -- By managing an organization based more on knowledge and customer service (good-will), one can more easily adapt to drastic changes in the marketplace. This evaluation scenario takes the place of relying solely on prediction and moves the organization from being a single sourced entity (e.g. fuel for x only) to a company that can provide energy solutions for a variety of clients in numerous geographical regions using global technology and development issues.

Question -- Are there sound tools that can be used to help mitigate the issue of future trends in x marketplace?

Chapter Title -- Tools for foresight

Chapter Summation -- Typically, when human beings learn something, they react to that stimuli and do something to either protect their investment or improve the chances for success. However, there are a number of tools that successful companies use to improve their ability to succeed in the future.

Definitions/Terms -- future trending, economic models, futurism, mental time paths

Integration of Knowledge -- Knowledge-based factual information is required in almost every business application, but it is the multidisciplinary approach to a broader set of stimuli that guarantees success in the marketplace.

Evaluation of Presentation- Management is not simply managing products. Nor is it simply managing people and their impact on the project. Rather, effective management takes the customer as a lifespan event, human resource knowledge, and the use of all available technological resources available to take steps to prepare the organization for the future. This may cause discomfort because there are certain products, tastes, and even events that may cause drastic paradigm shifts in both the internal (company) and external (consumers, raw materials) universes. The companies that success embrace this ongoing process and take steps to actively and aggressively find ways to manage their position with the universe, ostensibly without blinders on Question -- Since the process of finding ways to improve future performance are continually evolving, what can an organization do it the present to be more likely to succeed in the future?

Chapter Title -- Decision Making as a Learning Activity

Chapter Summation -- Taking on the role of lifelong learning within the organization, the process of applying information and human capital to issues and problems becomes part of the job experience, and certainly one that makes the company more successful in the long-term.

Definitions/Terms -- decision making process, proxy leadership, brain tank, intellectual fuel, cybernetic terms, mental models

Integration of Knowledge -- Integration of knowledge = leadership; leadership = multidisciplinary input and strategic direction; strategic direction = success. To be effective in this, pulling from multiple disciplines and learning modes is essential.

Evaluation of Presentation -- The key points to understanding an appropriate learning process that leads to robust and strategic leadership roles takes on four categories: 1) Perceiving or developing mental models about the event, issue, or crisis; 2) Embedding that information -- explaining how we see it as an individual, and then come to terms with agreement and externalizing; 3) Concluding -- Gradually, shared understanding calls for action plans -- "what might happen if," and 4) Acting -- taking the learning model forward and tactically planning and executing an event or series of events that will have a positive impact upon the issue that caused #1 in the first place. This, for successful organizations, is a continuous loop

Question -- How does the ebb and flow of social, political and economic culture (external) impact the role of decision making within the modern organization?

Chapter Title -- Only Living brains learn

Chapter Summation -- Living and existing are two different things -- but it is only the living and vital brain (or thinking being) with appropriate knowledge-based tools, that is poised to make the jump from existing (day-to-day tactical, putting out fires, reacting) to really living (vital strategic organization, forward thinking, taking charge of the situation, moving continually forward).

Definitions/Terms -- paradigm shift, innate knowledge, thinking vs. doing, shared experience, group think

Integration of Knowledge -- Innovation is clearly the key to long-term, sustained growth. However, innovation must typically be radical, not incremental -- take a chance and do something. Successful organizations find that not everything will stick, be profitable, or always fit in future strategic direction. However, being timid in the modern economy is NOT an option.

Evaluation of Presentation -- Modern business structures are so highly complex and competitive that the old paradigm -- improving efficiency and the bottom line, is no longer all it takes to be successful. Instead, continued reinvention of both the company's product line and industry capabilities is not only necessary, but will help decide which companies succeed and which fail. Too, because the half-life of technology is so short, radical and category breaking innovation is needed not just to compete, but to provide the global environment with positive growth.

Question -- How can companies convince stakeholders that even if short-term goals and product launches are not entirely successful, it is the long-term, far thinking and strategic role that has the most chance for success?

Chapter Title -- Managing for Profit or for Longer Term

Chapter Summation -- Much has been said about the difference between the Japanese management of the 70s and the Western approach. Generally speaking, one approach is primarily tactical (Western) the other strategic. That is not to say that both approaches are not needed in a successful organization; however, Western companies often get too focused on quarterly profits, and fail to see the larger picture.

Definitions/Terms -- Theory Z, Japanese management, kaizan approach, strategic thinking

Integration of Knowledge -- Keeping employees long-term is strategic. It is far more efficient and cost-effective to retain expertise than to continually recycle human capital and retrain. This keeps the knowledge base within the company.

Evaluation of Presentation -- Consensual decision making allows employees to feel as if they have input into decisions that affect their daily lives, their jobs, processes, and contribution. With this view they are far more likely to buy into decision that support management. This also moves them away from the union mentality and finds balance within management for long-term and continual profits vs. short-term egregious profits. However, it is more the attitude toward profit that forms the basic paradigm shift. Profit is good; it is necessarily for an organization to continue to run. It is not, however, reasons to obsess.

Question -- What is the relationship between long-term employees who are promoted through the organization and brining in newer, executive talent?

Chapter Title -- The Memory of the Future

Chapter Summation -- Learning is perception and we humans are particularly suited for cognitive communication and memory. Open, extroverted companies that encourage learning will succeed in the long run because they view life's foibles as challenges rather than barriers.

Definitions/Terms -- long-term learning environment, change perception, change management, integration of knowledge.

Integration of Knowledge -- The smart and successful organization has a hypothesis already in place -- a contingency plan integrating all facets of the organization, for what might happen if a portion, or all, of their resources run out or are interrupted in some manner. Technology changes, even faster now than 100 years ago. Companies that produced, say certain chemicals for armaments in the 1800s had to change with the times and new technologies in order to compete. So too, do the companies of the early 21st century need to use their knowledge bank and human resources to not only understand the marketplace of today, but rather than exploiting dying industries as cash cows (e.g. yellow pages, etc.), invest into future growth and train and develop staff for future possibilities. By thinking forward, innovation becomes more commonplace.

Evaluation of Presentation -- By managing an organization based more on knowledge and customer service (good-will), one can more easily adapt to drastic changes in the marketplace.

Question -- What is necessary to implement a continual training process that will allow a company to project and prepare for worst case scenarios?

Chapter Title -- The Corporate Immune System

Chapter Summation -- Regardless of the nature of an organization, there are still dangers from tolerance and openness. These dangers have little to do with control or inefficiency, but instead, may cause inadvertent stress within the entire organization.

Definitions/Terms -- immune systems, parasitic organizations, resistance, intolerance

Integration of Knowledge -- It is the balance and resolution of control and freedom that will typically be solved when using a knowledge based approach to management. The more problems and conflicts rise to higher levels, the more inefficient those levels become. If issues cannot be solved appropriately at the level necessary, the idea of trust and openness goes by the wayside, and upper management then believes it must tighten control.