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The Living Companyby Arie De GeusHarvard
Business Review (March 1997)
Presented ByTakbir Ahmed BiswasLynn
BlankensteinLexi GrayNorawit (Travis)
VirunkitkosonYixiong (Kyle) Zou
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What is a corporation?

• Defined as
• a large company or group of companies,
  recognized by law as a single unit.
  Oxford Dictionary

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What is a living company?

• Described as
• An organization that is viewed as a community
  of human beings that is in business any
  business to stay alive.
  De Geus

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Life Expectancy of a corporation

• 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

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Why is there such a 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

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Living 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

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Conservatism in Financing

• Why 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

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Sensitivity to the World Around Them

• Adaptable to changes
• Forecasting of future
• Comparison of Past, Present and Future
• Reaction to Whatever was going on.

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Awareness of Their Identity

• 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 companys
  health

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Tolerance of New Ideas

• The Manager must
• Understand the values and traditions of the
  company
• Keep the company alive
• Let people grow within the community
• Place commitment to people before assets

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Valuing People, Not Assets

• 27 long lived companies changed business at
  least once
• Scuttle assets to survive
• Assets and Profits are necessary, but not
  purpose of life

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Valuing People, Not Assets (2)

• Companies with different model
• Scuttle people to survive
• Purpose to make profits for shareholders
• If in trouble, get rid of people

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Loosening Steering and Control

• Managers must
• Heed opinions and practices of other people
• Give people space to develop ideas
• Take risks with people

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Loosening Steering and Control (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

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Why learning is essential
Organizing for Learning

• Circumstances change
• Living companies also change

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Conditions of organizational learning
Organizing for Learning (2)

• Numerous individuals
• Some of whom are innovative
• System supports

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How living organizations learn
Organizing for Learning (3)

• Birds that flock learn faster
• Developing programs

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The 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

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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

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Passing the Baton

• Strict exit rules
• Stewardship is important as one person exits and
  another comes in
• Important to understand the nature of the company

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Conclusion

• 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

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Questions?