Part I and II of this series explained that risk management is an interdisciplinary framework for learning to thrive in an uncertain world. The greatest risk facing middle market and larger companies is the development of business leaders who can put a human face on risk management and help grow a workforce that is constantly learning, improving and adapting to ever-changing conditions.
"Knowledge is in every country the surest basis of public happiness." George Washington's First State of the Union Address, January 8, 1790.
Part two of this article introduced our readers to the work of Arie de Geus, a retired Dutch business executive and perhaps our best living expert on corporate life expectancy or what we call “learning to thrive.” The author of The Living Company: Habits for Survival in a Turbulent Business Environment (1997), De Geus’s research led him to conclude that a company should be viewed as a living being and the decisions this corporate being makes result from a learning process which is the sum of the skills, capabilities and knowledge of the people that comprise the company.
The responsibility and accountability for this learning process rests with the leadership of a business. Do the leaders recognize that knowledge, not capital, is the most important production factor and that the health of the organization depends on the ability to build institutional learning systems that transcend individual learning? Do the leaders see themselves as stewards of a living work community or as a manager of an economic company? If the leadership mindset is the latter, a culture of “skills for money” will ensue that requires strong hierarchical controls and leads to a territorial approach that tells other members of the corporate flock: stay out of my space! This type of culture lowers the collective learning abilities of the company, which, in turn reduces the pace at which the organization can adapt to a world of uncertainty.
Why is adaptation so important? Because the world in which we live and work is becoming more uncertain by the day. In his most recent book, Thank You for Being Late – An Optimist’s Guide to Thriving in the Age of Accelerations (2016), Thomas Friedman persuasively argues that the 21’st century is transitioning from an interconnected world to an interdependent one – we are moving "from a world of walls where you build your wealth by hoarding the most resources to a world of webs where you build your wealth by having the most connections to the flow of ideas, networks, innovators and entrepreneurs. In this interdependent world, connectivity leads to prosperity and isolation leads to poverty."
Put simply, the ability to adapt is the key survival skill in an interconnected world that keeps accelerating through globalization and technological advancement.
Of course, none of this is new. History is replete with examples of dislocation, displacement and disruption – internal combustion engines replaced horses just as electricity replaced steam. A key differential in resilient organizations is whether business leaders recognize that their most important responsibility is to ensure the workforce is learning effectively in a world of continuous change. Dupont, which is over 200 years old, started as a gunpowder company; in the 1920’s, it was the major shareholder of General Motors, and today, Dupont is a specialty chemical company. Mitsui, which is about 300 years old, began as a drapery shop. It later became a bank, went into mining and at the turn of the 20th century, Mistui became a manufacturer.
Not only are there plenty of historical examples of companies that embody continuous learning, history teaches us that technological advancement creates more and better-paying jobs than it destroys. For example, when automated tellers were introduced in the 1970s, many predicted that ATMs would lead to fewer branches and less employees. And while an average bank employed fewer staff, the ATM technology reduced operating costs so much that that banking industry saw a 50% increase in the number of bank branches and, in turn, more jobs.
At SandRun Risk, we have been fortunate to work closely with those that have studied two of the most admired examples of learning cultures: Toyota and the Toyota Production System and UCLA’s John Wooden, ESPN’s Sport Coach of the 20th Century. In each example, the chief learners were the senior leaders. As Wooden liked to say: “learning is a leader’s lifetime pursuit and it’s what you learn after you know it all that counts the most.”
We will continue exploring this subject in our next column and in the meantime, we invite our readers to explore our three-part interview of Don Dinero – a leading expert on one of the world’s best methodologies (Training Within Industry (TWI)) for helping business leaders create institutional learning systems.
Friedman, “Folks, We’re Home Alone,” New York Times, Sept. 27, 2017.