Thursday, September 1, 2011

3 Principles of Corporate Longevity

I came across a study by Zenlin Kwee from the Erasmus University in Rotterdam that discusses some strategic principles of long-lived firms.  As with most other studies of old companies, this one focuses on a very small data set. In fact, Kwee's work is an in-depth study of just two firms in the same industry: Shell and BP.  The three principles of "sustained strategic renewal" which he identifies are interesting:

1. Manage the internal rate of change to match or exceed the external rate of change
2. Optimize the principle of self-organization (this principle implies the delegation of decision making to the lowest possible level and maximizing capabilities at every level of the organization)
3. Engage in concurrent exploitation of existing capabilities and exploration of new opportunities (this involves balancing innovation and knowledge creation with improvements in productivity process, efficiency and product extensions and enhancements)