Shigemitsu Kongo, a Japanese Buddhist temple builder, formed his construction company Kongo Gumi in in 578 AD. His company built relationships with their customers that lasted for 1,400 years, surviving through many wars and natural disasters, just like their temples.
It wasn’t technology that nearly killed the company, but cashflow. The oldest company in the world became a subsidiary of Takamatsu Construction in 2006.
There’s a very good chance you will outlive the company you work for. Whilst our life expectancy is increasing, the lifespan of organisations appears to be in decline.
The average age of a company listed on the S&P 500 has fallen from almost 60 years in the 1950s to less than 20 years today. Only 30 of the original companies still exist in 2019, the 35th anniversary of the FTSE 100.
Disruptive technology is killing off older established companies at a much faster rate than ever before.
This is why when you go to conferences you’ll see presentations selling the virtues of Uber, Amazon, Netflix and Google.
Be like them the wisdom goes. Be agile. Only by doing as they do may you survive.
This is only half the story though.
Rarely , if ever, do we look at the companies that are bucking this trend. The companies who have been around forever and are still doing business.
A look at the oldest companies operating today is fascinating.
Worldwide there are over 5,500 companies that are over 200 years old. However the distribution of these is heavily weighted to just a few. Japan dominates the list (3,146), followed by Germany (837), then the Netherlands (222), and France (196).
I started this week staying in Düsseldorf, Germany, in a district known as “Little Tokyo on the Rhine” — one of Europe’s largest Japanese communities. I was there to talk to European students about the opportunities of smart cities , but I concentrated more on the possibilities of building upon the wisdom of communities that have existed for generations.
It’s deeply unfashionable to talk about , let alone revere, older things today. It’s almost like innovation started with the iPhone and disruptive companies began with Uber.
My week ended with a visit by the Disruptive Innovators Network to Bromford, who at 56 years old is barely out its pre-school stage in Japanese or German terms. It was interesting to hear in the talks by Helena Moore and John Wade how there was almost an apology for referring to things we had learned more than five years ago, as if we were becoming embarrassed by the weight of our own history.
We shouldn’t be though. The right culture for innovation is one where there is:
- Just enough friction – with teams having regular, intense debates
- The practice of high standards, with a steady supply of high performing people who are committed
- Permission to be different – a culture where it’s allowable, even encouraged, to push back.
- The ability to think and act experimentally with a tolerance for failure through practical experiments
However it’s also a culture that creates a feeling of belonging and a feeling of purpose.
Why have so many Japanese and German businesses lasted so long?
A study by the Bank of Korea found that such companies thrived over the years because they created new demand while sticking to a corporate culture that promoted tradition, attention to detail, and frugal innovation.
Instead of going after short-term results, they pursued longstanding trust with customers and partners. They also pursued growth within their means, rarely borrowing to expand.
In his book The Living Company, Arie De Geus attributed the success of older businesses to four factors:
1. Long-lived companies were sensitive to their environment and remained in harmony with the world around them.
2. Long-lived companies were cohesive, with a strong sense of identity. No matter how widely diversified they were, their employees felt they were all part of one entity.
3. Long-lived companies were tolerant and generally avoided exercising any centralised control over attempts to diversify the company.
4. Long-lived companies were conservative in financing. Frugal even.
However his strongest point is contained in one sentence “Companies die because their managers focus on the economic activity of producing goods and services, and they forget that their organizations’ true nature is that of a community of humans.”
It’s time to stop worshipping the new and the shiny. We need to strike a delicate balance between continuation and innovation, being reliable and disruptive at the same time.
Creating a culture where these two competing sets of values can coexist is difficult – and not always a comfortable place to be.
Clearly though , the innovation potential of us older lumbering giants is vastly under appreciated – and the disruptive power of the younger and hungrier is often overstated.