Forgive the French!
However, the title was prompted by pondering the work of the late Arie De Geus [including “The Living Company”], recently mentioned in a thoughtful column by Andrew Thornhill of the Financial Times when discussing the possible distinctions between those companies which will, and those which will not survive The Great Cessation.
For business executives of a certain “vintage”, De Geus (who formally retired in 1980 after 38 years) was famous as the leader of Royal Dutch Shell’s (RDS), Strategic Planning Unit, and thus the main progenitor of the process of scenario planning- something which may well be taken for granted now, yet which was little short of revolutionary in its day.
What De Geus tried to do was make managers distinguish between “l’avenir” and “les futurs”. The former essentially means “what will come”, and the latter “potential futures”. While both matter, it is the ability to foresee and adapt to the latter which is fundamental for any entity’s long-term survival and prosperity.
As De Geus pointed out, those companies, which he termed “intolerant”, going for “maximum results with minimum resources” appear to do remarkably well when times are stable. However, when dislocation, stresses or volatility appear, they become very vulnerable to existential risks. And the consequences of the pandemic certainly count as a “dislocation”!
De Geus’ underlying thesis was that companies which manage to survive for decades, then centuries, and occasionally a millennium*, treat their enterprises as “living work communities”, rather than just as purely economic machines- i.e., people, not industrial or financial assets. Consider that the average life of a S&P company is now estimated at well under 50 years, while the corporation in a recognizably modern “joint stock company” guise is barely 200 years old. In fact, De Geus found that the average “life expectancy” of a northern hemisphere business was no more than 20 years.
So, what did De Geus see as the characteristics of resilient, long-lived businesses?
- Their managers realize that they are a community of human beings in business to stay alive and prosper
- They are good at managing for change- i.e., adaptable- as their environment changes
- They are tenacious in protecting their capital, and so financially conservative
- All the members of the business know what its goals are
- New ideas are tolerated, rather than ignored or even suppressed
- They value people, not assets
- Their corporate structures are flexible in terms of control and decision-making
- They are learning organizations
- Managers and executives see themselves as stewards for the next generation- i.e., they are not selfishly self-interested.
At Awbury, we cannot say whether we shall survive as a business for centuries. However, as our business is based upon our ability to adapt as the world and its risks change around us, and on providing bespoke solutions to our clients as their needs change, we aim to give it a good try!
And a parting quote from De Geus: “The ability to learn faster than your competitors may be the only sustainable competitive advantage”. Indeed!
The Awbury Team
*For the record, the world’s oldest surviving business is considered to be Kongo Gumi, a Japanese construction business, founded in 578AD and specializing in Buddhist temples; while the oldest in Europe is believed to be Stiftskeller St. Peter, a bierkeller/restaurant founded within an Austrian monastery in 803AD. The sublime, vs. the hedonistic!