Book review: The living company

I always thought that the really big companies were immortal. That once an organization attained a certain size, it would last forever, barring some catastrophic event or weird fluke. But it turns out, that the average life span of Fortune 500 companies is under 50 years!

Arie de Geus pioneered a study at Shell that uncovered this fact, and looked at companies that have lasted a long time, and “The living company: Growth, Learning and Longevity in Business” summarizes the characteristics of these organizations. The most important fact that sets them apart: They are not in business only for the money!

Arie de Geus has been in Shell’s top management for a long time, and he’s the one usually credited with inventing the term “learning organization”. He’s also the first person to begin talking about planning as learning, ie. that planning an organizations future is actually a learning process and should be conducted as such. This is part of the thinking behind Shell’s famous scenario planning, in which they don’t try to predict the future. They ask “what if?”. This allowed them to plan for the 1973 and 1979 Oil crises, the fall of the Soviet Union and other major events that impacted the oil industry.

The book quotes another study which shows that visionary companies (ie. companies which had other driving motivations than increasing shareholder value) in the long run outperform other companies by a factor of 15! So not going for the money is actually the best way to make money.

And I can’t help thinking that the visionary, longlasting companies are probably also nicer places to work!

I recommend this book to anyone who wants the story of the learning organization from a guy who’s been there himself. This is hard business practice, not academia talking.

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