The Living Company: The Tolerant Company

I recently completed reading The Living Company by Arie de Geus. I became interested in the book because the author of Solving Tough Problems, an exceptional book I read several months ago, referenced Arie de Geus throughout as a mentor.

The author of The Living Company does a great job of building his case that a company needs to be much more than an ‘economic entity’ – a company’s purpose is to survive and to fulfill its potential. The implications of such a goal are far reaching in its effects on a company. For example, in the chapter entitled The Tolerant Company de Geus discusses how innovation should drive diversification and how innovation should be fostered in a living company:

Historically, diversification by tolerance for activities in the margin has a much better track record than diversification by dictum. Could it be, in fact, that the very top of a company is not the best place to take initiatives-except in a crisis? Under “normal” conditions, to judge by the record of long-lived companies, the senior manager of a company should make fewer decisions about the business itself and spend that time instead focused on creating conditions in which other people within the company can make good decisions about the business.

Tolerance, in other words, is derived from a value system. In can only exist in a company where people recognize the value of creating space for innovation.

Creating ’space for innovation’ has implications throughout a company. Not only must management keep from trying to manage innovation, the company must also hire bright people capable of innovating and the company must continually cultivate an environment for innovation.