Abstract
M.Comm.
The average life expectancy of a multinational corporation is somewhere between 40 and 50 years, according to Arie de Geus, author of "The Living Company: Habits for Survival in a Turbulent Business Environment" (De Geus, 1997) In fact, one-third of the companies listed on the 1970 Fortune 500 had disappeared just 13 years later, thanks to mergers, acquisitions or being broken apart.
Like the single-cell amoeba, which continually changes its shape and direction based on external influences, long-lived companies are sensitive to their environment and know how to adapt and evolve to fit ever-changing conditions, (Caudron, 2000:54).
While adaptability is a key contributor to corporate longevity, there are other factors that help companies live long, healthy and profitable lives. In his book, "The Living Company", Arie de Geus explores the factors that allow large companies to thrive over a long period. After studying 27 long-lived companies, he reveals that four common factors explain their success:
Long-lived companies were sensitive to their environment. Whether they had built their fortunes on knowledge or natural resources, they remained in harmony with the world around them. As wars, depressions, technologies and political changes surged and ebbed, they always seemed to excel at keeping their feelers out, tuned to whatever was going on. They did this despite the fact that there was little data available, let alone the communications facilities to give them a global view of the environment.
Long-lived companies were cohesive, with a strong sense of identity. No matter how
widely diversified they were, their employees, and even their suppliers at times, felt
they were all part of one entity.
Long-lived companies were tolerant of activities, experiments and eccentricities that
kept stretching their understanding of possibilities.
Long-lived companies were conservative in financing. They were frugal and did not
risk their capital gratuitously. They understood the meaning of money in an oldfashioned
way; they knew the usefulness of having spare cash. Having money in hand gave them flexibility and independence. They could pursue options that their competitors could not. They could grasp opportunities without first having to convince third-party financiers of their attractiveness.
More than anything else, managers in adaptable companies realize they can no longer
conduct business the old-fashioned way. Gone are long-range plans, task-oriented
job descriptions, rigid functional divisions and top-down decision-making. (Caudron,
2000: 54) Instead, in adaptable companies:
Employees are given more freedom. The primary source of adaptability in organizations is the employees. For this reason, adaptable organizations treat people differently. They allow greater participation from employees and give them the freedom to decide how they will react to change.
Management sets broad goals and objectives. Because executives in adaptable rganizations recognize that employees are capable of making good decisions, the executives themselves make far fewer day-to-day decisions. Executives in adaptable companies may articulate a direction for the organization, but they don't dictate what needs to be done. By setting broad goals and objectives, as opposed to determining specific tasks, these executives allow employees the room to respond to an opportunity in a way that makes the best sense for that opportunity at that time.
The trick with setting broad goals instead of defining specific tasks is that executives must know how to maintain the balance between complete control and total unpredictability. Adaptable executives must learn to provide enough guidance so that people aren't floundering, but not so much guidance that employees lose their creativity and initiative.
Executives regularly conduct scenario planning. Companies used to be able to plan projects five and 10 years ahead of time and then outline the specific steps needed to make those projects happen. But this is no longer possible in today's business environment.