The Biology of Business

The old model: Companies live forever and the people die. The new model:

Let's ask the unaskable question: What's so horrible about corporate death? For companies, just as for people, death is as sure as taxes. Easily 99% of all companies ever born have long since died. And yet talking about a company's demise is as taboo as talking about the death of an ailing loved one. But why? What's so tragic? After all, people don't die when a company does. In fact, they often move on to better opportunities. So why can't we get over it?

The real problem is that until recently, we never appreciated the simple fact that companies are alive. We have seen them as machines, as inanimate objects. And we have expected them to continue to "operate" forever in an efficient, mechanical way. Add a little oil to keep the gears from seizing, maybe throw in an occasional replacement part, and the company will roll on. The people may die, but not the company.

Now, with the gradual recognition that companies are living organisms, the flip side seems to be true: The company may die, but the people who worked for it live on. That's the growing reality that Stan Davis and I found as we researched the attitudes of CEOs in the biotech world for It's Alive, our book on biology and management systems.

We all know intuitively that companies have life cycles. Older companies can't seem to learn new tricks, while younger companies have the energy required for innovation. Take Maxygen, a six-year-old company in Redwood City, California. Maxygen uses a technology called gene shuffling to mimic the sexual recombination of biological molecules, giving birth to better drugs, chemical reagents, or materials. How does CEO Russell Howard see his company? "It's an amoeba," he says, "with pseudopods reaching toward resources. If the pseudopods are reaching in the same direction, the organization moves. If, as at Maxygen, they reach in four different directions, you can look at that organization and say, 'It's going to divide.' "

If that's what birth at a company like Maxygen looks like, how about death? Here's what Howard says about corporate mortality: "If the chicken is the egg's way of making another egg and the organism is the gene's way of making another gene, what difference does it make whether the organization survives? If the people and the ideas inside the organization go forward, isn't that what matters?" In other words, a company is an idea's way of making another idea.

So let's tell the truth: Every corporation will die. When it's time, it's the job of the leadership and the board to preserve as much value as possible by passing on the ideas and people in their most productive state. Companies deserve death with dignity.

Instead of the cruel and expensive "death by a thousand cuts" that workforces at most declining companies suffer, leadership could endow the process of redeploying the talents and assets of the business in an active and upbeat way. A company on its deathbed could spin out divisions, license or sell still-valuable patents, or let its most entrepreneurial employees bid for the opportunity to rebirth a technology in a new corporate life. In some circumstances, a dying company could even fund some of these new births in its "last will and testament." Of course, all of these things do happen today as companies wind down -- but under unpleasant and often desperate circumstances.

As with people, the hardest part for dying companies is admitting that the end is near. Terminal patients often vow to end their lives before they go into a final stage of misery, but put the act off until they have lost the will or the capability to follow through. Just as some believe that assisted suicide should join assisted living in gerontological care, companies may need help understanding that it's time to let go.

There's an opportunity here. If companies decide to stop calling in consultants to stave off death through desperate downsizings and restructurings, where will they turn for help? Perhaps an outside party could provide guidance by helping a company admit that the time has come, and maybe it could work with the company to find ways to redeploy assets, support outplacement that's good for people and shareholders, and manage the patent portfolio. Sort of a combination of company hospice and executor of the corporate will.

I'd call it Kevorkian Consulting.

Christopher Meyer is director of the Center for Business Innovation, a business-futures group in Cambridge, Massachusetts. With Stan Davis, he is the author of Blur (Little, Brown & Co., 1999), Future Wealth (Harvard Business School Press, 2000), and It's Alive (Crown Publishing Group, 2003).

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