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Thursday, November 24, 2016

'The Living Company': My Views and Perspectives

Recently I have got an opportunity of reading an article called "The Living Company" from Harvard Business Review. The article and concept might be old but it had principles that can be applied to the business of any era. Many companies which sustained from many difficulties have actually followed these principles and inherited their business generation to generation. Few companies which have failed to apply these lived very short time.
  1. What are those principles and guidelines to be followed by the companies to have a sustainable future
  2. On what perspective companies look their business
  3. How few companies failed to live long
If look into the history, we can find only two companies which had such a long history of operations. The first one is Japan-based Sumitomo founded in 1590 and the another one is Swedish company Stora, currently a paper pulp and chemical manufacturing company which started as a copper mining company more than 700 years ago.

Many companies called as commercial corporations are underachievers which exploited the fraction of their potential and lasted only for few years from their origin. There are many reasons behind early extinct of these companies. Many companies die early because their managers look the company as the tool of producing goods and making money rather than looking it as the community of human beings. They forget the human relations and merely focus on generating money. Due to having such kind of view, 90% of the employees are acting like passengers that frequently change companies looking into their career prospects. Only 10% of the employees remain as drivers of a company who become successful as money or project managers but fail as people managers. When a manager looks the labor force as real people who are also the drivers of the business, the perspective look of an employee towards company will also change which leads to the longest journey in this corporate world.

All happy families resemble each other but all unhappy families are different in their own way. What can be called as Living Companies evolved convergently, had harmonious relation with the people, developed new ideas that fit in this evolving world, valued their people and saw money as a tool which allows them to groom up their future rather as only driving force.

Management for the Change:

Stora, can be a very good example to tell how the company transformed along with the world and survived during  difficult times. The company survived the middle ages, reformation, two world wars, Industrial revolution. The company way of communication initially was dependent on horsemen, runners, ships and least focused on telephones or electronic way of carrying messages. The company business had shifted from copper to iron smelting, hydropower to latest paper, pulp and chemicals. They shifted their production technology from steam to internal combustion. This tells us how Stora is adapting to the changing world.

There is another very good life lesson one can learn from two birds named titmice and red robins of Great Britain. In the late nineteenth century in Great Britain milk man leave milk uncapped outside people's door. These birds are very tactic and used to enjoy the rich cream floating over the milk. This continued for 50 years till 1930. After that, British began to put seals on the bottles with an aluminum cap. So, what happened next? By early 1950, the entire population of titmice birds learned to pierce the aluminum cap. But the other species red robins failed to learn the technique and didn't survive long. How could one species learn the technique while the other failed to learn?

Professor Allan Wilson explained the theory with these three conditions. For any species to exploit the opportunities in the environment should fulfill these three conditions.

  1. The member of the species should have the ability to flock or move in herds instead of sitting in isolated territories.
  2. Few of the members should have the ability to learn new skills or techniques
  3. The species should have the ability to transmit the acquired skill to the other members of the herd through communication.
When a species have all the above characters, it can adapt to the changing environment. Here in the example, titmice flock in herds but red robins are basically territorial birds. Hence the way of living of titmice birds have brought advantage to adapt to the new environment.

As birds that flock learns faster, an organization that encourages flocking behavior gain advantage of developing new skills and sharing them with the colleagues.

Corporate companies spend lakhs of money in incorporating new skills to their employees and they ask their employees to attend the seminars or training programs. But actual learning doesn't happen in the official sessions. Learning happens mainly from the colleagues during session breaks when they flock.

Why few companies failed to live long?

As I said only 10% of the employees are drivers and the rest 90% are passengers. These passengers spend their time and expertise for money. This behavior arises because the benefits and rewards from the organization are shared to only a few people leaving others outsiders. Due to such kind of organizational behavior, an employee doesn't feel inspired for the contract assigned. Succession in such kind of companies is very difficult.

If for a company creation of wealth is only for a few people, it will be like a puddle of rain water. When more rain drops are added to the puddle, it expands its surface area leaving original drops in the middle. This type of approach has many complications. The puddle cannot survive much heat, starts evaporating. The company survival mechanism should be like a river. River sustains longer time, survives drastic conditions, no drop survives at the center for a long time.


How Indian Companies are Struggling for Succession:

We are aware of Tata-Mistry ugly spat that happened a few months back. This explains how business finds a balanced solution for succession issues. Tata Group was founded in 1868 is a family run business. When leaders change, ideologies change and so the way of doing business also changes. Company evolves into a new stage. But the problem here is Tatas had set some values for the group and they see labor force as real people and they don't do business for profits. The successor also should stick to the values set by the group. Sometimes it will be hard for an organization to bear poor earning business but if you abide by some principles and don't look for the result and concentrate on the action, you can be a winner. Same is the case in Titan which was run in losses for a long time and came to limelight during recent times. Tata chose some businesses to create and give value to the people. An example is Nano car project from Tata motors. Despite its poor performance, Tata wanted to hold the operations and said the project is not intended for profits bit to give value to ordinary people whose owning a car is a dream. When Mistry tried to layoff such poor performing businesses and overriding the group core values, Succession will be of great difficulty and costly.

When the succeeding leader also abides by the core values of the organization, succession will be easier and the organization will be long lived.









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