Companies are dying young; how centurions are surviving and thriving – Part II
In an era of accelerating change, company lifespans are getting shorter than ever.Yet, Japan boasts of eight of the world’s ten longest-running businesses – all founded prior to 800 AD. What might be the secret of corporate longevity?
Japan – the land of the youthful elderly
Japan boasts of eight of the world’s ten longest-running businesses (all founded prior to the year 800 AD), including the world’s oldest hotel, Nisiyama Onsen Keiunkan, a hot spring that has been in continuous operation since 705 AD. The country also houses the world’s oldest sake brewer (SudoHonke, 1141 AD), religious goods company (Tanaka Iga, 885 AD), confectionary (IchimojiyaWasuke, 1000 AD), and, until recently, construction company (Kongo Gumi, 578 AD) – all of which have been verified by the Guinness Book of World Records.
Nishiyama Onsen Keiunkan is the oldest company in the world. Founded in 705 AD, the Japanese hot spring hotel has operated continually for an astonishing 1,300 years. This company has existed since before Charlemagne became the first emperor of the Holy Roman Empire. The company’s founder, Fujiwara Mahito, was the son of a close aide to Emperor Tenji, Japan’s 38th emperor, and he built the hotel in a mountainous village in Hayakawa, Yamanashi Prefecture. It’s said that some of the most famous shoguns and samurai soaked in the hot springs there.
Nishiyama Onsen Keiunkan is a company that put its employees first, ahead of shareholder interests and growth. They never tried to open numerous branches and build a hotel chain. The numbers bear this out: “89.4% of the companies with more than 100 years of history are businesses employing fewer than 300 people.”Making growth a priority is anathema to long-term survival.
Not only has the same family run the hotel for 52 generations, but there are also families among the staff who have held the same post for generations. That’s why they run the business in the spirit of service, as a means to earn wages and protect the hotel – not as a way to profit. In fact, most surviving businesses are inns, hotels, pubs, breweries and restaurants. They are most stable businesses built on unshakable reputations.
The Flexibility of the Stable
Finding stability but being flexible is another mantra for longevity. Being flexible is critical for sustainability, and Nintendo is a prime example. The company is 125 years old and long pre-dates their 1985 video game console. Founded as a card company back in 1889, Nintendo’s first product was a playing card game called Hanafuda. With the success of their handmade cards, they quickly moved into mass-producing playing cards and that’s what they focused on until 1956.
Once they realised that playing cards were just a type of toy,Nintendo applied the experience gathered in making playing cards to toys – and found success. Making toys eventually led them to making electronics and then video games. Rather than living and dying with the playing card trend, Nintendo was flexible in how it interpreted its industry and value, and it found longer-term stability in applying creativity to making games – and there will always be a market for products that are fun.
Navigating the Future: “The Living Company”
In the realm of organisational management and business strategy, The Living Companyauthored by Arie De Geus stands as a seminal work, offering profound insights into the longevity and sustainability of corporations. He challenges conventional business wisdom and proposes a radical paradigm shift in understanding the nature and purpose of companies.
The Concept of the Living Company
At the heart of De Geus’s thesis is the analogy of the company as a living being. Unlike traditional views that treat companies as mechanical entities, De Geus argues for a more organic perspective. He posits that the most enduring companies are those that adapt and evolve, much like living organisms. This concept upends the standard profit-maximisation model, suggesting that long-term survival and adaptability are more crucial.
Four Pillars for Longevity
De Geus identifies four key qualities that contribute to the longevity of a company:
- Sensitivity to the Environment: Long-living companies remain in tune with changes in their business environment. They are not just reactive but proactive in anticipating shifts in markets, technology, and societal trends.
- Cohesion and Identity: Companies with a strong sense of identity and a shared purpose tend to outlive their competitors. This cohesion fosters a culture where learning and development are central – aiding adaptability.
- Tolerance and Decentralisation: Enduring companies embrace diversity and decentralisation. By allowing for autonomy and experimentation, these firms foster innovation and resilience.
- Conservative Financing: A cautious approach to financing ensures that companies are not overexposed to market volatility. This principle, advocates for self-sufficiency and avoiding excessive reliance on external financing.
Learning as a Key Element
A pivotal theme in The Living Company is the concept of learning. Long-lived companies are learning organisations. They continuously evolve, adapt, and grow through learning from their environment and experiences. This learning extends beyond mere knowledge acquisition to include unlearning outdated practices and adapting to new realities.
Challenging Conventional Wisdom
De Geus’s findings challenge many established business practices:for instance, short-term focus on profit and shareholder value, arguing that it can undermine long-term sustainability. Instead, enterprises should strive for a balance between immediate financial goals and long-term health and adaptability.
In Part 3, we conclude with a comparative study of the transformation of three global centurion organisations, and also discuss some Indian organisations that have withstood the test of time andthrived.
[To be concluded]
