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  • Joana Lenkova

"The Living Company" or How not to kill your organisation


Is it really Technology that is killing off corporate America as CNBC article by Michael Sheetz suggests?


The same article reports that according to Credit Swiss, the average lifespan of companies today is under 20 years. In the late 50's this figure was roughly 60 years. There are many factors at play, making the current reality more volatile and competitive, but also a lot more entrepreneurial. On one hand you have companies, stuck in their old ways, which worked in a calmer reality, who get disrupted by players from a different industry. On the other, you have many more start-ups, who are ready to take a higher risk, launch quickly and often times fail. But is it technology, or the lack of it, the main reason for organisations to fail?


What does it take for a company to live long and prosperous life?


Arie De Geus and his team at Shell embarked on a journey to understand what are the key capabilities of a living company. They made a list of top 30 long-lived companies and among those were two remarkable ones which are still operating today. Sumitomo, established in 1590 in Japan and Sweden's Stora, born in 1288.


So what are the key traits of a living company?


According to the research De Geus performed, here are the 4 qualities the living companies possessed to ensure they lived up to their potential and didn''t suffer premature death.


"They were conservative in financing"


These companies understood the power of cash and the independence and advantage it can give. It is essential to have the means to outbid a competitor, acquire a smaller disruptor that can provide complementary assets to your core business, or simply sustain yourself for a longer period of time when times are hard.


"They had sensitivity to the world around them and were good at change management"


The living companies had a great sense of what was happening in the surrounding environment, were able to adapt to it in a timely manner and capture opportunities or escape threats. They were good at learning, un-learning and re-learning and were not victims of their own success, letting go of old habits that won't serve them in a new reality.


"They had a clear awareness of their identity"


The successful companies diversified, but they always stayed true to their core and what they stood for. They had to choose, they had to trade off, they were not everything to everyone. They took their employees on a journey, empowered them and made sure everyone was aware of what the company direction was. It is essential for the employees to feel a sense of belonging. This does not happen through strict hierarchy, decisions taken behind closed doors, and lack of communication across all levels. Let's not forget that people are core to every organisation and they can make or break it.


"They had high tolerance to new ideas"


All companies in the study proved to have tolerated experiments and eccentricities, recognising the future may bring an opportunity for a new business that is seemingly unrelated to the current one. High tolerance to risk is a quality that all living organisations have. Failure is not punished, it is sometimes incentivised. How about companies that have museums of failed ideas? It is important to allow for and plan for the risk. It is riskier not to. And by rewarding brave attempts at new ideas, you encourage entrepreneurial thinking and you get a chance for a real big win, which doesn't come along while you are kicking back comfortably in your office, hiding behind the routine tasks and linear plans, not taking into account the outside ever-changing world.


While technology is a great driving force of change, it hardly is the core reason for companies to fail. There are core traits that companies should possess to ensure their longevity and success and we shouldn't be fooled that having the latest technology will save the company from failure.


Curious?

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The Living Company, HBR

Technology killing off corporate America: Average life span of companies under 20 years







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