The Living Company - Learning Organizations

Most businesses fail. The “Living Company” is a good place to start if youwant your business to survive. Arie de Geus has written an excellent book on change, organizations andsurvival called the “Living Company”, published in 1997, Harvard Business School.He was the head of corporate strategic planning for Royal Dutch Shell and spenthis 38 year career with the Company. He wrote this book after his retirementand it is the culmination of his life’s lessons in business as well asconsiderable research.

In 1983 Royal Dutch Shell, one of the largest companies in the worldlaunched an extensive study. The Study defined the commonalities of 27 majorcompanies that survived one hundred years. The average Fortune 500 Company survives 40 to 50 years. Many studies in the United States and Europe have found the average lifespan of companies is 12.5years. Royal Dutch Shell had been around for a century and desired to know whysome companies survive and most do not. The 27 companies were from all over theglobe. One Swedish company traced its roots back 800 years. Several companieslasted 400 years. To have survived one hundred years in 1983 when the study wasdone a company had to survive two world wars, the great depression, multiplerecessions, plagues, financial crisis, energy crisis and myriad market changes.

The Lessons The study found four common characteristics of the 27 companies whoprospered and survived the centuries: 1) They were sensitive to their environment. They had their feelers outconstantly gathering information about the world they lived in. This gave themthe ability to react and change in a timely manner and to stay in harmony withthe world they functioned in. 2) They had a strong sense of identity; were cohesive; had strong culturesand internal advancement was a shared feature. 3) They were tolerant of outliers, experiments and did not squelchcreativity with the company. 4) They were all conservatively financially managed, had an aversion to debtand valued cash. This gave them flexibility, financial freedom, the ability tochange, ability to weather storms and the position to seize upon opportunities. There are many faddish business books out there purporting to give thelatest and greatest theory on how to be a stellar company. This is a book thatdeserves to be read and studied as the lessons will be valid in all decades andbusiness cycles. Arie de Geus is also a great public speaker and well worthhearing.