In Part 1 of this post we discussed about the intellectual obsolescence of individuals if they fail to keep themselves relevant. Such obsolescence is applicable not only to individuals; but also to organizations and companies.
Most often companies and organizations get started by people who are visionaries, who have exciting new ideas, who are willing to take risks and who are willing struggle to see their dreams coming to fruition. They get a team of people who share their passion to work on these. Once they succeed, some of these organizations consciously build processes to ensure that they upgrade their knowledge base, encourage their people to actively participate in this knowledge build up and infuse newer ideas and newer talents so that they don’t become obsolete in the changing world. They place their best people on their biggest opportunities and not on their biggest problems as Jim Collins observed his bestselling book “Good to Great”. They move from Good to Great and enjoy enviable corporate longevity.
Many organizations after their initial success forget about this need for continuous upgrade. They get caught up in their current competencies and current success and their focus shifts to defending their current turfs. Their priorities are maximizing short term benefits and comforts and they get excited with unproductive corporate rituals that do not create value for the clients and thus to the organizations. Jack Welch and Lou Gerstner have explained about their experience on corporate bureaucracy in established and successful companies like GE and IBM and how it stifled the growth and innovation even to the extent of brining the organization to near extinction. As the famous adage goes the ‘Barbarians at the gate will walk in and dominate the board rooms’. Those who cannot feel comfortable with this leave and those who are happy to maintain status quo get to be the majority. Quoting Jim Collins again; “Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bus, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth.” (Good to Great, P. 121).
When this happens, the value creation suffers and organization becomes internally focused; focused on a variety of processes and rituals creating lots of paperwork that keeps everybody busy, that gives reason to pat each other’s shoulders irrespective of creation of new growth opportunities for the company. Product innovation and service upgrades stop and secretarial, legal and bureaucratic trapeze come to the forefront. Internal debates cease to be on ideas; but on gossip about events and people.
This is the reason the mortality rate of companies is quite high. I am not referring to the almost 90% mortality of the start-ups within one year of their launch; but of companies which have successfully established and performed at least for a decade. Look around, successful companies which have sustained their success or even survived for 25 years are very few anywhere in the world. A Business week article has pointed out that "The average life expectancy of a multinational corporation-Fortune 500 or its equivalent-is between 40 and 50 years. This figure is based on most surveys of corporate births and deaths. A full one-third of the companies listed in the 1970 Fortune 500, for instance, had vanished by 1983-acquired, merged, or broken to pieces.Human beings have learned to survive, on aver-age, for 75 years or more, but there are very few companies that are that old and flourishing" [1] And that is why companies and organizations have to have a conscious strategy to address this".
The world we have created is a product of our thinking; it cannot be changed without changing our thinking. Albert Einstein
[1] http://www.businessweek.com/chapter/degeus.htm
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Most often companies and organizations get started by people who are visionaries, who have exciting new ideas, who are willing to take risks and who are willing struggle to see their dreams coming to fruition. They get a team of people who share their passion to work on these. Once they succeed, some of these organizations consciously build processes to ensure that they upgrade their knowledge base, encourage their people to actively participate in this knowledge build up and infuse newer ideas and newer talents so that they don’t become obsolete in the changing world. They place their best people on their biggest opportunities and not on their biggest problems as Jim Collins observed his bestselling book “Good to Great”. They move from Good to Great and enjoy enviable corporate longevity.
Many organizations after their initial success forget about this need for continuous upgrade. They get caught up in their current competencies and current success and their focus shifts to defending their current turfs. Their priorities are maximizing short term benefits and comforts and they get excited with unproductive corporate rituals that do not create value for the clients and thus to the organizations. Jack Welch and Lou Gerstner have explained about their experience on corporate bureaucracy in established and successful companies like GE and IBM and how it stifled the growth and innovation even to the extent of brining the organization to near extinction. As the famous adage goes the ‘Barbarians at the gate will walk in and dominate the board rooms’. Those who cannot feel comfortable with this leave and those who are happy to maintain status quo get to be the majority. Quoting Jim Collins again; “Most companies build their bureaucratic rules to manage the small percentage of wrong people on the bus, which in turn drives away the right people on the bus, which then increases the percentage of wrong people on the bus, which increases the need for more bureaucracy to compensate for incompetence and lack of discipline, which then further drives the right people away, and so forth.” (Good to Great, P. 121).
When this happens, the value creation suffers and organization becomes internally focused; focused on a variety of processes and rituals creating lots of paperwork that keeps everybody busy, that gives reason to pat each other’s shoulders irrespective of creation of new growth opportunities for the company. Product innovation and service upgrades stop and secretarial, legal and bureaucratic trapeze come to the forefront. Internal debates cease to be on ideas; but on gossip about events and people.
This is the reason the mortality rate of companies is quite high. I am not referring to the almost 90% mortality of the start-ups within one year of their launch; but of companies which have successfully established and performed at least for a decade. Look around, successful companies which have sustained their success or even survived for 25 years are very few anywhere in the world. A Business week article has pointed out that "The average life expectancy of a multinational corporation-Fortune 500 or its equivalent-is between 40 and 50 years. This figure is based on most surveys of corporate births and deaths. A full one-third of the companies listed in the 1970 Fortune 500, for instance, had vanished by 1983-acquired, merged, or broken to pieces.Human beings have learned to survive, on aver-age, for 75 years or more, but there are very few companies that are that old and flourishing" [1] And that is why companies and organizations have to have a conscious strategy to address this".
The world we have created is a product of our thinking; it cannot be changed without changing our thinking. Albert Einstein
[1] http://www.businessweek.com/chapter/degeus.htm
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constant learning is integral to building an organization that remains relevant for a long time. many a time regular updating of new knowledge does not happen because individuals and so organizations find it very difficult to embrace knowledge that goes contrary to existing knowledge
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