Companies are not immortal, nor should they try to be immortal

Posted by: Helen Walters on May 5, 2009

VG.jpgToday was the first day of the World innovation Forum, held at the Nokia Theatre here in New York City. There were three keynote speakers, the noted futurist and Stanford professor, Paul Saffo, the bottom-of-the-pyramid innovation proponent, CK Prahalad and Tuck business school professor and GE innovation consultant Vijay Govindarajan, pictured, who wryly noted that he got the bum slot at the end of the day (and who still managed to captivate the audience.)

All three were really strong speakers, who made great arguments for the need for innovation. Refreshingly, these arguments weren’t posed in hideous innovation consultant-speak, but all three had a candid manner that embraced the opacity of the downturn and celebrated the opportunities therein. And all three were adamant about the need for a new type of firm to emerge from the current global economic turmoil. Prahalad, for instance, described “velcro” organizations that can form and reform as necessary, on a project basis. Govindarajan described the pursuit of “next practices” as opposed to “best practices,” pointing out that if everyone subscribes to the same rules of the same game, then no one will reinvent anything. He cited Muhammad Yunus’ work with the Grameen bank as a great example of someone finding out about conventional wisdom (in Yunus’ case about banking), and then doing exactly the opposite, to astonishing effect.

Meanwhile, Paul Saffo described the need to look again at how we even think about companies. “How come we have the expectation that a business should be immortal?” he said to me in a podcast interview we recorded right after he came off stage. “Companies are not immortal, nor should they try to be immortal.” Instead, he proffered, why don’t companies think of their legacy in the same way that humans do: by way of their offspring. In this way, the success of a company would be measured more by the success of its spin-offs than its own longevity. It’s a provocative idea. Let me know what you think.

Photo courtesy Dov Friedmann

Reader Comments

Pete Mortensen

May 6, 2009 1:21 AM

That's a pretty killer line-up. I'm a big Govindarajan fan, especially, so very excited about the discussion of "next practices." We talk here some about best practices being last practices, the way things used to be done. Fun to see some synergy.

Saffo's argument is a fascinating reframe of the question of the legacy of a business. By this measure, however, the Shockley Semiconductor Laboratory is the most successful business in Silicon Valley history, because it birthed Fairchild Semiconductor, which birthed Intel, AMD, National, Sequoia Capitalm and Kleiner Perkins, Caulfield & Byers, among many others. All of whom did much, much more.

But at the same time, I can't imagine we'll ever do that. We'll mainly remember Shockley, if at all, for being such a jerk that he drove all the best talent of Silicon Valley to start their own company to destroy him. It's the same reason HP doesn't take pride in inadvertently spawning Apple by turning down Steve Wozniak's idea for a personal computer.

So I don't know where I fall. Fairchild is certainly revered for the legacy of other companies it's begun, but it really seems like the exception, even in Silicon Valley. Can you think of companies that we respect for the offspring they helped create as much as the success that they enjoyed?

Helen Walters, Editor, Innovation & Design

May 6, 2009 7:44 AM

Pete -- thanks for your thoughts. I wonder if the shift to 'creator' economy that Paul Saffo describes in our conversation also presages a shift for organizational structures -- and the way we think about them -- writ large. As we move away from an industrial economy, the emphasis shifts to individuals. And that has real connotations for how we think about companies, which can't rely on size for longevity. Paul says, "Google will eventually fail," which might seem like a shockingly heretical idea, but makes sense when looked at through his lens as a futurist. Indeed, the company has already seen vested employees, or talented workers who thrive on an entrepreneurial/start-up culture and don't want to participate in a large corporation leave in order to start on the next project. A large issue, of course, is something that Paul also points out, that this idea "would really change the nature of shareholder value," which is something of an understatement! But shareholders already set a lot of store in who's sitting in the C-suite; why shouldn't they also pay attention to the talent elsewhere in a company? Thanks again for writing, Helen

AppleNotes

May 6, 2009 6:49 PM

I think this is a beautiful vital idea. We all , as individuals or businesses, should concentrate more on our impact on the world rather than our personal or corporate ego. Just like people, the company cannot live forever, not in the same state at least.

Prakash

May 7, 2009 1:25 AM

Helen, thanks for getting us the excellent affirmative views from VG, CK and Saffo for the audience sitting here in this part of the world. I liked the way Saffo mentioned about the next generation organization, and this is a fascinating, simplified concept for CEO's to remember before acclaiming themselves as the best innovative company. While we have examples to site this from Pete's comment, I believe, the notion of offspring as a measurement of success should first be vetoed by the shareholders, even before making it to the boardroom. Then there needs to be a considerable shift in the way an organization's culture is defined to make this success, encouraging the employees to even shift from the core competency of their business and get the ideas to light.

Jeff Alexander

May 7, 2009 9:57 AM

I'm reminded of Henry Mintzberg's way of describing much of the management consulting business as "corporate geriatrics"--the practice of keeping alive corporations that should have been killed off years ago. A similar concept is the 'zombie corporations' in Japan that are kept alive through terminally-impaired financing. Are there any companies that put themselves out of business voluntarily as a means to redistribute their own assets to better purposes? The only one that comes to mind is General Dynamics, which came close to doing so in the 1990s but ended up coming back.

IBM might be an example of a firm which created value through "offspring"--in particular, Microsoft and Intel, when it chose to outsource its PC hardware and software architecture to those firms.

Helen Walters, Editor, Innovation & Design

May 7, 2009 10:09 AM

AppleNotes/Prakash/Jeff -- thanks for your comments. Definitely much food for thought here. Funnily enough, Clay Christensen followed along these lines of thinking the next day at the conference (see my round up here) and cited IBM specifically as a company that was able to evolve effectively while other mainframe computer companies died. He also mentioned the growth of stores such as Target -- and the demise of the traditional department store such as Target's "parent," the Dayton Company. It's a really interesting idea -- though quite how this could be codified into an organization's management practices, of course, is quite another matter! Thanks again for your insights, Helen

Jeff Alexander

May 7, 2009 5:39 PM

Another interesting example is how the Japanese subsidiary of 7-11 became so successful that it bought its own US parent. It's a retailer with one of the most sophisticated supply chain management systems anywhere, rivaling that of Wal-Mart.

Julie Lenzer Kirk

May 7, 2009 7:59 PM

Thanks for sharing your insights, Helen.

We apply our entrepreneurial process to work with companies to help them spin off companies and while still getting some financial benefits by retaining equity in them. It is absolutely possible and in my opinion makes much more sense than just trying to maintain giants. After all, the circle of life applies to companies, too. Or it should.

It was great to meet you at the WIF - I hope our paths cross again!

Mike Gibbs

May 18, 2009 10:21 PM

The Camp BizSmart winning innovation was on stage the first day at WIF talking with Cisco CTO, Padmasree Warrior. They stressed teamwork, collaboration, & being able to use the unique strengths of each member of the team to their advantage. We were proud of our "tweenpreneurs" and they were inspired by Vijay's presentation. Thank you, Mike Gibbs, CEO www.campbizsmart.org

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What comes next? The Bloomberg Businessweek Innovation and Design blog chronicles new tools for creativity and collaboration, innovation case studies in both the corporate and social sectors, and the new ideas that have the power to change the way things have always been done.

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