To many executives and managers, books such as In Search of Excellence, Built to Last, and Good to Great have turned into a source of inspiration. But now we know that many of the “excellent companies” (Peters and Waterman, 1982), “built-to-last corporations” (Collins and Porras, 1994), and “good-to-great” firms (Collins, 2001) have now gone from great to, well, barely OK. Shouldn’t we, then, adopt a slightly different concept, called “resilience,” and learn from firms that last 100s of years, or even north of one thousand?
Indeed, in an upcoming article in the Strategic Management Journal, Carmeli and Markman feature the concept of “resilience through smallness.” After considering hundreds and studying more carefully 150 long-lasting firms that managed to outlast governments, nations, and cities, the authors show that most multi-centennial firms are actually small, frequently family-owned businesses.
Hope this “stretches” our view of firm resilience and endurance.
Following such bestsellers as In Search of Excellence, Built to Last, and Good to Great, many managers now venerate growth and increased size as shock absorber against competition, inter-firm hostility, and decline.
An upcoming article shows that long-lasting firms that managed to outlast governments, nations, and cities, are actually small, frequently family-owned businesses. Examples of “resilience through smallness” include: Japan’s Hoshi Hotel has been functioning since 718 AD; the Fonderia Pontificia Marinelli, a bell foundry in Italy, was founded in 1000 (with bells tolling in New York City, Beijing, and Jerusalem); the Venetian glassmakers, Barovier & Toso, were established in 1295; Richard de Bas, a French family business, makes paper since 1326 (their paper was used by Braque and Picasso); a Tuscan winemaker, the famous Antinori dynasty, has been producing its vintages since 1385; the Beretta family has been crafting guns in Italy since 1526; the oldest family firm in the United Kingdom, textile makers John Brooke & Sons, has been in business since 1541; and Kongō Gumi (a temple construction firm in Osaka, Japan) was the world’s oldest independent company, operating for 1,429 years, since 578 until it was bought out in 2007.
Firms that expand gradually and organically extend their longevity no less, and perhaps even more, than those that grow through M&As albeit organic growth is appreciably slower. Resilience through smallness explains why many of the multi-centennial exemplars listed above reflect a narrow geo-product area—meaning, an enduring positioning that is quite “local” in terms of geographical location or product space.
Carmeli, A. & Markman, G.D. (forthcoming) Capture, governance and resilience: Strategy implications from the case of Rome. Strategic Management Journal.
I don't think smallness is the answer, just a symptom. As I commented in the Harvard Law School Forum on Corporate Governance and Financial Regulation on their article "Governance Problems in Closely-Held Corporations" at
http://blogs.law.harvard.edu/corpgov/2010/01/21/governance-problems-in-c...
"I wonder to what extent these findings might be due to a tendency by widely held companies to externalize costs. I suspect that closely held firms (especially family businesses) tend more toward sustainable business practices and therefore choose to internalize more costs."
We need to humanize corporations that already have many of the same rights as people in law. I wrote about this in a chapter I recently contributed to a Wiley finance textbook on corporate governance (see http://trustenablement.com/index.htm#book), in which I suggested "aspirational corporate governance" as a possible approach to finding the solution.
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This is a great mind-flip. Just to put a finer point on it: are you suggesting that the "barrier" here is the tendency to equate BIGNESS with SUCCESS (excellence, greatness, etc.) when a more useful framework might be resilience or endurance? Can you unpack that a bit: e.g. how does that lens of growth/size as success actually become a limiting factor. Over the years I've observed too many leaders who think of size, in itself, as a strategy. That mindset is pretty well threaded through the corporate world--what are the *specific* challenges that presents? Maybe you could invent a HACK around a pathway to organizational resilience? Thanks!
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Hi Gideon:
Great perspective on the key drivers that make for a long-lasting organization. I suspect that changes in our world such as global integration, increased speed and volume of information, and complexity have made it more difficult for larger organizations to maintain long-term solvency and top-level performance. Eric Schillinger
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My first post on resilience was incomplete, so I hope the following will clarify things.
The study by Carmeli and Markman didn’t focus only on small firm. Instead, it asks a broader question: What strategies are a key to organizational resilience, and what tactics are indispensable to enhance firms’ resilience?
Drawing on over 1,000 years of historical data on the Republic of Rome (clearly, a large organization), the study identifies 2 generic strategies—capture and governance—that together with 4 tactics are essential for firm resilience. Capture strategy relates to market expansions and growth, while governance strategy refers to the capacity of firms to assimilate, retain, defend, and increase their dominance within annexed markets. The four tactics—saving power, stronghold base, isolating and weakening, and forward outposts—shore up and reinforce the capture and governance strategies, to create more resilient enterprises. The strategy-tactic framework also offers insights on resilience through smallness, thus illustrating its conceptual utility to organizations of ALL sizes including small enterprises.
Some might worry that each strategy and tactic, by itself, is not overly novel. What is quite novel, useful, and non obvious, however, are (i) the system-wide view of the interactions between the generic strategies and the supporting tactics; and (ii) the articulation of the conditions under which the strategies and tactics would be most critical for resilience.
To use an analogy, by itself, the bargaining power of customers is neither a novel nor unique concept. Yet, when Michael Porter introduced the 5-Forces Framework for analyzing industry structure and business strategy, it became a powerful conceptual tool. Now, I’m not claiming that this study or the strategy-tactic framework is equal to that of Porter 5-Forces Framework. I simply point out that clarity develops from appreciating how seemingly “trivial” or “unrelated” terms are actually connected; in this case, how generic strategies and specific tactics interlace to improve firm resilience.
By the way, firm resilience is important because the costs of disbandment can be staggering. Also, the survival rate of businesses remains low: for every ten small businesses, seven survive their first year and only two remain in operation after five years. These statistics are consistent with research showing that 50 to 70% of all new firms disband within their first five years; over 80% disperse in the first decade; and many firms survive but do not thrive.
Oh, and, Zildjian (cymbal, drumstick, and mallet manufacturer)—founded in Constantinople, Turkey in 1623, then relocated to Norwell, Massachusetts in 1929—is featured in the study too.
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Interesting thought... You could probably reduce the company size down to a single individual. A single individual has a job or some sort of an income forever and outlasts companies and recessions.
Let me add a build here: the "Blue Ocean Strategy" book questioned "Built to Last" and "Good to Great" as well, but their research concluded that not a single company will succeed forever. Those that succeed for an extensive period of time typically do so due to pure luck. When you study old companies, you can learn either the history of luck or the types of things companies can do to reduce to risk of failure. There are very few companies in the world that survive for an extended period of time.
BTW, you can add Zildjian, a Turkish cymbal manufacturer to your list of ancient firms. Here's another great resource:
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