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Article - Opinion

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 modesty.

 

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 species.

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 this.

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 each other.

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 centres.

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 here.

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 game: Harvard.

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.


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