Arie de Geus : 'a keynote speech'
Summer Workshop, 13-16 July 1995,
organized by 'Stichting Netherlands
Foundation for Organizational Learning',
hosted by Center for Organizational Learning and Change.
Ladies and gentlemen,
This was not supposed to be an after
dinner speech, but as it is after ten o'clock, it is going to
be an after dinner speech. And yet I want to be a little serious,
because I personally have invested a lot in this workshop and
in what, I hope, is behind it.
This room reminds me of how we started
three years ago at Nijenrode. Peter Senge and I happened to be
at a systems dynamics conference in Utrecht and we were invited
to come and give a talk in this very room. I remember that evening.
There was a table standing over there behind which the president
of Nijenrode, Peter and I were sitting. The room was filled with
Dutch business people and we were giving our talks about organizational
learning. My contribution was about scenario planning.
The important point I wanted to get
across was how wrong it is in business to deal with the future
by trying to predict it. The much more intelligent way of dealing
with the future is by visiting various versions of it and by
asking yourself, what you would do if a particular future would
come about. In other words, do not rely on predictions!
To get the point across -I like telling
stories- I tell this story about the mayor of Rotterdam in 1920.
"Suppose", I said, "somebody comes into his room
and tells him about what is going to happen to his city in the
next 25 years". Now, 25 years is a scenario period. What
happened from 1920 to 1945: the Weimar republic in Germany, the
crash of the stock exchanges in 1929, the big depression, war,
Blitzkrieg, German bombardments of the city of Rotterdam, at
the end of the war demolition of all port facilities....
Deep into the story I ask my audience:
"....imagine you are the mayor of Rotterdam; what would
you do if somebody foretold you all this....?". All of a
sudden I notice that I am losing my audience. The door had opened
and somebody had come in. And the audience is looking at the
person entering and starts muttering and chuckling. Then the
president of Nijenrode whispers into my ear: "That's the
mayor of Rotterdam". Talking about scenarios....!
Now let me go on by saying a few
words about my aspirations for this meeting. I would like to
start by saying how encouraged I am to see all of you here, knowing
many of you and where you come from. That you have taken the
trouble to come as late as this in the summer season to Nijenrode,
I translate -I hope I am not arrogant or preposturous when I
say that- as meaning that the subject for which we have come
together is probably worthwhile.
Each of you will have different reasons
for being here and for paying your trip and your fee. But allow
me to express my reasons. I thought about them when I flew over.
As I pondered I concluded that my reasons possibly would sound
a little dramatic. You know, though I haven't lived in Holland
for more than 30 years, I am still a very calvinistic Dutchman,
having guilt feelings about saying grand things, about losing
First allow me say something from
my former background as a Group Planning Coordinator at Shell.
We did a lot of interesting research in that time. What struck
me most, was the discovery of the very high corporate mortality;
the discovery that the average life expectancy at birth of commercial
institutions across many continents, is between 40 and 50 years.
Companies die like flies..! And every corporate death is a social
misery story with lots of human suffering.
The second part of what we found
was that the maximum life expectancy of companies is in the hundreds
of years. My neighbour here comes from a company that is 200
years old, DuPont. My Scandinavian contacts made me discover,
ten or fifteen years ago, Stora, sevenhundred years old!
So here we have a species, the corporate
commercial species, that is really still in the Neanderthaler
age. Any species that has a gap between maximum life expectancy
and average life expectancy, that ranges between three, four,
five hundred years as a maximum and fourty, fifty years as an
average, such a species really is still in the Neanderthaler
age. We are looking at a species that is underdeveloped, that
is way below its potential. So you can not help but ask the question:
what are the reasons for this state of underdevelopment of business?
I can certainly give no answers,
just a number of considerations and questions, gradually building
in my mind, lately.
First, I think we are wrong in the
way we build and run those working communities that are our companies.
There is a distortion in our minds, put there by economic thinking.
To believe that the purpose of life in business is making profit,
is denying what Russell Ackoff told me a number of years ago:
"Profit is like oxygen, you need it to live but it is not...,
it cannot be the purpose of life".
There is something very wrong here.
We treat people as instruments to get profit, rather than as
constituents or members of a work community.
A second question that comes up in
my mind is the way companies tend to concentrate and centralize
power. I am a European in heart, blood and tradition. I am steeped
in the trias politica. I come from a company that is built on
checks and balances, on equilibrium, where it is impossible that
anyone can grab final power. But that is not a normal situation.
Generally, we see it as totally normal in the corporate species
that power is clung to at the corporate level. There are lots
of books written about how power naturally floats to the top.
A third reason for the underdevelopment
of the corporate species may be the neglect of the alternatives
to the economic goals, I already mentioned.
My other neighbour at the table is
the chief executive of a number of shipyards here in the heart
of Holland, many of which go back 300 years. When he started
telling his American neighbour about them, he told about how
the shipyards and the community of which they were part, used
to be one, equal and the same.
That is not in the first place an
economic story, not one just dealing with economic goals. He
didn't talk about the maximization of shareholders value. Companies
play a societal role. Companies are the associations through
which people pursue goals of wealth creation in life, in the
same way as churches are the institutions where people pursue
religious goals in life.
However, I was told at university
that companies are associations meant to produce goods at minimum
cost, to sell them at maximum price in order to maximize profit.
If, in the face of what we just said
about the social and societal function of the enterprise, one
keeps talking exclusively about the maximization of shareholder
value or strictly adheres to the above purely economic definition
of the enterprise, I think that we have travesty of reality.
Yet we let our thinking about companies and about the way we
run them, completely be dominated by this partial view of the
And, last but not least, I think
we are very bad at utilizing the intelligence available in companies.
Work done at MIT and going on here
in Europe in a number of companies, including Shell, corroborates
there are effective ways to mobilize more of the brain potential
available in companies. We've run experiments, so I can be fairly
confident about the figures.
We know that applying methods, like
the ones the MIT OLC is experimenting with, can accelerate decisions
by a factor two. I use the word acceleration; it is really something
you can measure, since you can measure time.
You can take a particular set of
decisions and measure how much time they took to be made under
the old way of dealing with them in the company. Then you look
at how long similar decisions take when the newer ideas about
play, learning, learning by play, simulation, computermodels,
etcetera were applied.
Acceleration of decisions in business,
in big businesses especially, must be worth many millions of
dollars of cost savings!
A second question is, of course:
did we get better decisions? Usually, people that took part in
those decisions are inclined to say that, yes, they think, it
looks, it feels like they actually found better decisions than
they would have by the old process. But, of course, that is a
statement you cannot prove. There is no way you can run a double
blind experiment on this sort of situation.
So, there is promise: if the goal
we put our minds to, is to try and make better use of available
brain capacity, that goal is worth all our time. Because there
is a reward!
Yet some of the results are also
alarming. Yesterday I was called by one of the sponsors of the
MIT OLC who said that she was parting with her company. She is
not the first person to tell me this. We are looking here at
a remarkable phenomenon: in a number of companies, where successful
experiments have been going on, the promoters and organizers
of those experiments paid with their job. We must try and understand
The question put to this meeting
is "introducing learning to organizations, making better
use of the brain potential that we have in the company, what
does it take?". Clearly the proceeds are, as I have just
said, high but, as usual, there is no free lunch in life. The
proceeds being high means risks are high. Have you ever seen
a business with high profits and low risks? There are risks and
we should understand and manage them.
So what does it take? What do we
aim for? Let me start by saying what my hopes and aspirations
are for this meeting.
I hope that this meeting will be
the start of a European network of academics, consultants and
business people, who know each other and who are beginning to
share a language, who are able to call each other and call on
My second hope is that we will indeed
learn, in those two and a half days, something about the conference
question. What does it take? I put it to you, the stakes are
high enough. It is worth an effort. It's worth the risk, and
as good managers we have to understand the risk and manage it.
My third hope for this meeting is
that it may help to get a group of European companies and European
subsidiaries of companies together to start an initiative in
Europe to set up a series of experiments. Experiments in organizational
learning. And that we will be willing to allow others to look
into our own shops.
And my fourth hope for this meeting
is that it may plant the seeds for the European members of the
international alliance of learning centres that Peter Senge and
I have been talking about since the very beginning.
The idea behind it is the following.
Yes, we know already a little bit about institutional learning.
Yes, we know a few tricks. Yes, the MIT learning centre already
has a number of `sponsors', that have access to those tricks.
But the original idea of setting
up the organizational learning centre was that we really did
not know about the subject. We needed -and we still need- serious,
high quality research. We need people in the tranquility of the
academic environment to take the time to think, to take the time
to set up experiments together with business. So we need learning
Learning centres are about learning.
Naively, a number of years ago I thought that fact could possibly
interest universities; I thought universities were about learning....!
Now, I believe that especialy business
schools are in real need of some new thinking. Business schools
are open to an increasing competition, in Europe probably even
more so than in the States. Until very recently national students
went to national business schools. A united Europe means that
a top student in France is looking around and chooses between,
let's say, Insead or London Business School or maybe Nijenrode
or a German business school.
Business schools in Europe are wide
open to a competition they are not used to. We all know then
a virtuous circle starts: if you're a good business school, you
get good students; if you get good students, you get good faculty,
if you.... etcetera. There is a direct feedback loop at play
However, in business schools the
last renewal in their educational methodology took place 50 years
ago: the introduction of case studies. The school that took the
risk and put that on its agenda is still ahead in the competitive
My case is that it is time for a
methodological renewal of educational methods. The international
alliance we have in mind, opens the opportunity for universities
to be in the game in which, in partnerships, research is done
about new learning methodologies. The results are available to
both the business partner and the academic partner.
The idea of the international alliance
is: let's try to get five or six academic centres that are prepared
to take the risk of setting up academic research centres in partnership
with a circle of business partners.
Last year we had a meeting of two
days at MIT about how we should go about this sort of expansion.
The obvious option is to make clones. What until then we had
seen happening in practice was that some professor, somewhere,
would write MIT or the Sloan School, saying "...we are terribly
interested in learning. Tell us how to do it and send us a few
people and we will start a learning centre..".
To cut short the two day discussion,
the final conclusion of that meeting was that MIT will no longer
do anything of the kind. It will look for academic partners that
make it. Those that generate the energy to set up a serious research
centre out of their own volition.
The next question MIT will ask is
whether the new centre will have something to contribute. And
I think that is the right sort of attitude towards cooperation.
So, my hope for this gathering is
that we are able to plant a few seeds that will possibly germinate
in some European academic institutions.
Now it would be miracle if even one,
let alone more, of these four wishes would come out. I am not
going to give away which is the one that I would give priority,
because here is something that we ought to be talking about together,
if that at least is what we want to do.
Now, you have been a great audience.
Thank you very much for listening to what I wanted to say.