LOs and Metanoia - Arie de Geus and the "Learning Company" LO27074

From: Artur F. Silva (artsilva@mail.eunet.pt)
Date: 07/27/01

Linked to LO25939 - A Search for LO's and Metanoia

Dear lo-learners

Please see below my next post of this series.



Part II - Two Conceptions of LO's

II.1. Arie de Geus and the "Learning Company"

I became acquainted with the concept of "Learning Organization" through
the seminal article of Arie de Geus "Planning as Learning" (PL), published
in the March-April 1988 issue of of the Harvard Business Review, later
developed in his book "The Living Company" (LC), of 1997. De Geus also
published an article with the title "The Living Company" in the Harvard
Business Review (March-April 1997) - indeed a presentation of the book

It's true that the expression "learning organization" doesn't appear in
the 1988 HBR article. But the concepts of "institutional learning",
"accelerating institutional learning", "mental models" and "shared mental
models" were already there. So, when the LO concept appeared it's relation
with the article from de Geus was obvious for me.

I think the majority of people, in this list and elsewhere, more often
relate the origin of the concept of LO to Senge and his "The Fifth
Discipline" (1990). I don't. And I think it is important to state this, as
I will try to show that the two conceptions, even if they have
similarities, have different origins and objectives and really constitute
two different models of the "Learning Organization".

It would be perhaps interesting to open the previous paragraph to
discussion and see how many would like to question the paternity I am
stating. Fortunately (or unfortunately) the point has no discussion! It's
Senge, himself, in his Forward to "The Living Company" that says: "It was
through Arie de Geus, whom I met over 15 years ago, that I first became
seriously acquainted with the concept of organizational learning. That
meeting began the journey of a lifetime." (LC, pg. 1)

Back to the 1988 HBR article -- there are probably many personal reasons
to justify why I immediately found it so important.

First, it was not a text from a scholar, reflecting about companies from
the outside -- it was from an insider, a "corporate man", at the time the head
of planning for the Shell Group, where he previously had line
And this article was a follow-up to two articles published in HBR in
1985 by Pierre Wack (also previously head of planning at Shell) about
scenario planning as a tool to change mental models ("micro worlds")
of the management team. All this resonated with my experience of almost
20 years at IBM.

Second, de Geus was not claming that a "learning company" should be
"created", nor was he a guru with a "prescription" (like reengineering or
downsizing); on the contrary, he wasn't proposing any "new solution"; he
was stating that every company is a learning company -- some of them
completely fulfill that potential, the majority suffer from "learning
disabilities". I could observe those disabilities both at IBM and with its

Third, being myself a planning consultant (in my case for Information
Systems) I had already noticed that the institutional learning obtained
during the planning process is at least so important as the plan itself.
In the case of Shell, de Geus shows how the use of "scenario planning" at
the corporate level can change the older mental models of managers and
create a new set of shared mental models about different possibilities.
Hence, planning can be a tool for institutional learning and, as planning
is done regularly, a tool for continuous learning. In my case, it was
mainly the learning achieved by all managers and departments of a company
that Information is a corporate asset that must be managed at an
organization wide level and not only at a departmental or individual
level. Indeed the creation of a new shared mental model in relation with
"Information Management" was usually considered by customers at least so
important as the Plan itself.

But, fourth, and most important: in the 1988 HBR article, de Geus
(briefly) described the Shell Study about longevity in companies (later
developed in LC). The Shell study discovered that some 1/3 of all created
companies die in about 10 years -- companies have a big infant mortality
rate! But even the life span of other companies is only about 20-30 years.

"Yet some companies obviously do learn and can adapt. In fact our survey
identified several that were still vigorous at 200, 300, and even 700
years of age. What made the difference? Why are some companies better able
to adapt?" (de Geus, PL). A list of some of these companies is provided in
LC and include America's DuPont, the Hudson Company and Kodak, Japan's
Mitsui, Suminoto (created in 1590) and Daimasu, and some European
companies (the Swedish company Stora is more than 700 years old), not to
mention the UK members of the "Tercentenarians Club", which only accept as
members companies over 300 years old... The study identified 40 companies
"older and greater than Shell" (born in 1890) and studied 27 in detail
(LC, pg.10-12).

The LO model of the Geus has the following important characteristics:

 1 It's not an "a priori" or "prescriptive" model -- there are no rules or
disciplines that organizations obey to became LO's. On the contrary, it is
an "a posteriori" concept, related with the capacity of real companies to
adapt and survive.

 2 If many companies die in their first years and even most big companies
die in 20-30 years, and if, on the contrary there are companies that
survive for centuries (in a sort of "survival of species") then, to
explain that fact, de Geus admits that those companies that adapt and
survive are able to learn, and to learn quickly enough to survive.

 3 Having identified those companies, the Shell Study tries to understand
what are the common characteristics of those longer living companies that
has enabled them to learn, adapt and survive (I will come back to this

 4 In PL and in LC-HBR, de Geus never uses the expression LO but only
"institutional learning". According to the Index of LC, the expression LO
is used 4 times. Indeed, in two of these 4 instances the expression used
is "learning company" (pg. 28, 29). In the other 2 (pg. 19 and 77) LO is
used, but referring to a general concept that others use. In a certain
sense, de Geus doesn't seem very confortable using the expression LO and
speaks only about Companies. He relates company longevity with company
learning, hence the expression "Learning Companies". This is due to the
fact that, like species, companies survive in an environment of
competition. So he postulates that companies can learn and, hence, are
"living beings", as "only living beings can learn" (LC, pg. 95).

If on the contrary we consider, for instance, organizations of Public
Administration, or even some NGO's that are publicly subsided, they don't
fully compete and can be maintained alive by political decision. So the
fact that some government organizations are 200 years old, doesn't
necessarily mean that they are able to learn. They can be unable to
survive but being maintained "alive" (more or less "alive"...) by
"artificial" ways. This is my interpretation it is not clearly stated by
de Geus.

Back to the characteristics of "Learning Companies", de Geus equates
"companies that survive for a long time" with "companies that learn and
adapt", hence "learning companies".

Based again in the Shell Study, he describes (in LC) the characteristics
of those companies:

(a) "Sensitive to his environment" (open, learning)
(b) "Cohesive, with a strong sense of identity" (have a "persona")
(c) "Tolerant" (also used "decentralized")
(d) "Conservative in Finance" (pg. 12-14)

The rest of the book is a development of these characteristics and
an analysis of "companies as living beings".I will not devellop those
characteristics here, but I reccomend the reading. I will only refer
to some other points from LC that I find interesting:
 - A company is not an "economic machine". Its aim is not
    to maximize profits. A company is a "living being", composed
    of people ("human beings" and not "human resources"); it aim
    is "to survive" (LC, pg.25-27; see also the chapter "Managing
    for Profit or Longevity: Is there a Choice"? pg. 123-157);

 - For a company to survive it has to have the capacity to shift
    and change, to adapt and learn, to continuously produce
    new shared mental models of the environment and of the
    company itself. "The essence of a company is learning"
    (to compare with Harrison Owen's "The Business of Business is
    Learning", also of 1988);

 - "the essence of learning is the ability to manage change by changing
     yourself both for people growth (Piaget's "accommodation" concept,
     expressly referred by de Geus) and for companies";

 - "(as) decision making is learning, then all companies learn all the time.
    There is no need to "build" a learning organization. You already have a
     learning organization".

 - but, except in the case of longer living companies, frequently,
     companies have learning disabilities and in relationship to company
     learning, one can say that:
 - "It is slow...
 - It closes down options...
 - It depends on learning by experience, instead of by simulation...
 - It breeds fear..." (LC, pg. 77-80)

Some of these points are developed in a different way in LC-HBR, namely:
 - "Why do so many companies die young? Mounting evidence suggests
      that corporations fail because their policies and practices are based
      too heavily on the thinking and the language of economics.
      Put another way, companies die because their managers focus
      exclusively on producing goods and services and forget that the
      organization is a community of human beings that is in business
 - any business - to stay alive. Managers concern themselves
     with land, labor, and capital, and overlook the fact that labor means
     real people" (pg. 52);
 - "The manager of a living company understands that keeping the
     company alive means handing it over to a successor in at least
     the same health that it was in when he or she took charge.
     To do that, a manager must let people grow within a community
     that is held together by clearly stated values. The manager, therefore,
     must place commitment to people before assets, respect for innovation
     before devotion to policy, the messiness of learning before orderly
     procedures, and the perpetuation of the community before all other
     concerns" (pg. 54);
 - "such companies are willing to scuttle assets in order to survive.
     To them, assets and profits are like oxygen: necessary for life but
     not the purpose of life" (pg. 55);
 - "And once a company has adapted to a new environment, it is no
     longer the organization it used to be; it has evolved. That is the
     essence of learning" (pg. 56).

A last comment to stress that for people who have difficulty in seeing
companies as "living beings" (and not as "machines") the Foreword of Peter
Senge to LC makes a compiling case for that hypothesis. I have used it
with customers and I can guarantee its success...


Arie de Geus, "Planning as Learning" (PL), in Harvard Business Review,
March-April, 1988, pg. 70-74

Arie de Geus, "The Living Company Growth, Learning and Longevity in
Business" (LC), 1997, Nicholas Brealey (254 pgs)

Arie de Geus, "The Living Company" (LC-HBR) , in Harvard Business Review,
March-April 1997, pg.51-59

Harrison Owen, "The Business of Business is Learning",
1988, an informal paper, url: www.openspaceworld.com/business.htm

Peter Senge, Foreword to A. de Geus' "The Living Company"


"Artur F. Silva" <artsilva@mail.eunet.pt>

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