How to build a business that lasts 100 years
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0:01 - 0:04Imagine that you are a product designer.
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0:05 - 0:06And you've designed a product,
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0:06 - 0:10a new type of product,
called the human immune system. -
0:11 - 0:13You're pitching this product
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0:13 - 0:16to a skeptical, strictly
no-nonsense manager. -
0:16 - 0:18Let's call him Bob.
-
0:18 - 0:20I think we all know
at least one Bob, right? -
0:22 - 0:23How would that go?
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0:24 - 0:26Bob, I've got this incredible idea
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0:26 - 0:29for a completely new type
of personal health product. -
0:29 - 0:31It's called the human immune system.
-
0:31 - 0:35I can see from your face that
you're having some problems with this. -
0:35 - 0:37Don't worry. I know it's very complicated.
-
0:37 - 0:39I don't want to take you
through the gory details, -
0:39 - 0:44I just want to tell you about some
of the amazing features of this product. -
0:44 - 0:47First of all, it cleverly uses redundancy
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0:47 - 0:50by having millions of copies
of each component -- -
0:50 - 0:52leukocytes, white blood cells --
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0:52 - 0:54before they're actually needed,
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0:54 - 0:57to create a massive buffer
against the unexpected. -
0:58 - 1:02And it cleverly leverages diversity
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1:02 - 1:05by having not just leukocytes
but B cells, T cells, -
1:05 - 1:08natural killer cells, antibodies.
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1:08 - 1:10The components don't really matter.
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1:10 - 1:11The point is that together,
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1:11 - 1:16this diversity of different approaches
can cope with more or less anything -
1:16 - 1:18that evolution has been able to throw up.
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1:20 - 1:23And the design is completely modular.
-
1:24 - 1:27You have the surface barrier
of the human skin, -
1:27 - 1:30you have the very rapidly reacting
innate immune system -
1:30 - 1:34and then you have the highly targeted
adaptive immune system. -
1:35 - 1:39The point is, that if one system fails,
another can take over, -
1:39 - 1:42creating a virtually foolproof system.
-
1:43 - 1:45I can see I'm losing you, Bob,
but stay with me, -
1:45 - 1:49because here is the really killer feature.
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1:50 - 1:52The product is completely adaptive.
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1:53 - 1:57It's able to actually develop
targeted antibodies -
1:57 - 2:00to threats that it's never
even met before. -
2:01 - 2:04It actually also does this
with incredible prudence, -
2:05 - 2:09detecting and reacting
to every tiny threat, -
2:09 - 2:14and furthermore, remembering
every previous threat, -
2:14 - 2:16in case they are ever encountered again.
-
2:17 - 2:20What I'm pitching you today
is actually not a stand-alone product. -
2:22 - 2:26The product is embedded
in the larger system of the human body, -
2:26 - 2:29and it works in complete harmony
with that system, -
2:29 - 2:32to create this unprecedented level
of biological protection. -
2:32 - 2:35So Bob, just tell me honestly,
what do you think of my product? -
2:36 - 2:39And Bob may say something like,
-
2:39 - 2:42I sincerely appreciate
the effort and passion -
2:42 - 2:45that have gone into your presentation,
-
2:45 - 2:46blah blah blah --
-
2:46 - 2:47(Laughter)
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2:47 - 2:50But honestly, it's total nonsense.
-
2:52 - 2:55You seem to be saying that the key
selling points of your product -
2:55 - 2:58are that it is inefficient and complex.
-
2:59 - 3:01Didn't they teach you 80-20?
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3:02 - 3:05And furthermore, you're saying
that this product is siloed. -
3:06 - 3:07It overreacts,
-
3:07 - 3:09makes things up as it goes along
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3:09 - 3:11and is actually designed
for somebody else's benefit. -
3:11 - 3:15I'm sorry to break it to you,
but I don't think this one is a winner. -
3:15 - 3:17If we went with Bob's philosophy,
-
3:17 - 3:21I think we'd actually end up
with a more efficient immune system. -
3:21 - 3:24And efficiency is always important
in the short term. -
3:25 - 3:28Less complex, more efficient,
more bang for the buck. -
3:28 - 3:30Who could say no to that?
-
3:30 - 3:33Unfortunately, there's one
very tiny problem, -
3:33 - 3:36and that is that the user
of this product, you or I, -
3:36 - 3:40would probably die
within one week of the next winter, -
3:40 - 3:43when we encountered a new strain
of the influenza virus. -
3:45 - 3:49I first became interested
in biology and business, -
3:49 - 3:52and longevity and resilience,
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3:52 - 3:54when I was asked a very unusual question
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3:54 - 3:57by the CEO of a global tech company.
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3:57 - 3:59And the question was:
-
3:59 - 4:05What do we have to do to make sure
that our company lasts 100 years? -
4:07 - 4:08A seemingly innocent question,
-
4:08 - 4:11but actually, it's a little trickier
than you might think, -
4:12 - 4:17considering that the average
US public company now -
4:17 - 4:20can expect a life span of only 30 years.
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4:21 - 4:24That is less than half of the life span
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4:24 - 4:27that its employees can expect to enjoy.
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4:28 - 4:30Now, if you were the CEO
of such a company, -
4:31 - 4:34badgered by investors
and buffeted by change, -
4:34 - 4:37we might forgive you
for not even worrying too much -
4:37 - 4:39about what happens 30 years out.
-
4:39 - 4:42But here's something that should
keep you awake at night: -
4:44 - 4:47the probability that your company
will not be around in five year's time, -
4:47 - 4:51on average, is now
a staggering 32 percent. -
4:52 - 4:56That's a one in three chance
that your company will be taken over -
4:56 - 4:59or will fail within just five years.
-
5:02 - 5:04Let's come back
to our tech CEO's question. -
5:04 - 5:08Where better to turn
for advice than nature, -
5:08 - 5:10that's been in the business
of life and death -
5:10 - 5:12for longer than any company?
-
5:15 - 5:17As a lapsed biologist,
-
5:17 - 5:20I decided to immediately call
a real biologist, -
5:20 - 5:22my friend Simon Levin,
-
5:22 - 5:26Professor of Biology and Mathematics
at Princeton University. -
5:26 - 5:30Together, we looked at a variety
of biological systems, -
5:30 - 5:33ranging from natural tropical rainforests
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5:33 - 5:36through to managed forests and fisheries.
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5:36 - 5:38And we asked ourselves the question:
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5:38 - 5:43What makes these systems
resilient and enduring? -
5:44 - 5:48And what we found
was that the same six principles -
5:48 - 5:51that we saw underpinning
the miracle of the human immune system -
5:51 - 5:54actually cropped up again and again,
-
5:55 - 5:58from redundancy through to embeddedness.
-
5:59 - 6:03In fact, we saw these principles
not only in biologically enduring systems, -
6:03 - 6:06we also found them
being very characteristic -
6:06 - 6:09of long-lived social systems,
-
6:09 - 6:11like the Roman Empire
and the Catholic Church, -
6:11 - 6:12believe it or not.
-
6:12 - 6:14We also went on to look at business,
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6:14 - 6:19and found that these very same properties
also characterized businesses -
6:19 - 6:21that were resilient and long-lived,
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6:21 - 6:25and we noted their absence
from ones which were short-lived. -
6:27 - 6:31Let's first take a look at what happens
when the corporate immune system -
6:31 - 6:32collapses.
-
6:33 - 6:38This beautiful building is part
of the Shitennoji Temple Complex -
6:38 - 6:39in Osaka, Japan.
-
6:40 - 6:43In fact, it's one of the oldest
temples in Japan. -
6:43 - 6:45It was built by a Korean artisan,
-
6:45 - 6:48because at the time,
Japan was not yet building temples. -
6:49 - 6:54And this Korean artisan went on
to found a temple-building company. -
6:55 - 6:58Amazingly, his company, Kongō Gumi,
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6:58 - 7:04was still around 1,428 years later.
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7:04 - 7:07In fact, it became the oldest
continuously operating company -
7:07 - 7:09in the world.
-
7:10 - 7:12So how is Kongō Gumi doing today?
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7:14 - 7:16Not too well, I'm afraid.
-
7:17 - 7:18It borrowed very heavily
-
7:18 - 7:21during the bubble period
of the Japanese economy, -
7:21 - 7:22to invest in real estate.
-
7:22 - 7:26And when the bubble burst,
it couldn't refinance its loans. -
7:26 - 7:28The company failed,
-
7:28 - 7:31and it was taken over
by a major construction company. -
7:33 - 7:37Tragically, after 40 generations
of very careful stewardship -
7:37 - 7:39by the Kongō family,
-
7:40 - 7:44Kongō Gumi succumbed
to a spectacular lapse -
7:44 - 7:47in the ability to apply
a principle of prudence. -
7:48 - 7:50Speaking of company failures:
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7:52 - 7:54we're all familiar
with the failure of Kodak, -
7:55 - 7:57the company that declared bankruptcy
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7:57 - 7:59in January 2012.
-
8:01 - 8:05Much more interesting,
however, is the question: -
8:05 - 8:07Why did Fujifilm --
-
8:08 - 8:13same product, same pressures
from digital technology, same time -- -
8:13 - 8:17why was Fujifilm
able to survive and flourish? -
8:19 - 8:25Fujifilm used its capabilities
in chemistry, material science and optics -
8:26 - 8:28to diversify into a number of areas,
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8:29 - 8:32ranging from cosmetics to pharmaceuticals,
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8:32 - 8:34to medical systems to biomaterials.
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8:34 - 8:37Some of these diversification
attempts failed. -
8:38 - 8:39But in aggregate,
-
8:39 - 8:43it was able to adapt
its portfolio sufficiently -
8:43 - 8:45to survive and flourish.
-
8:47 - 8:49As the CEO, Mr. Komori, put it,
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8:50 - 8:54the strategy succeeded
because it had "more pockets and drawers" -
8:54 - 8:55than the rivals.
-
8:55 - 8:56He meant, of course,
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8:56 - 9:00that they were able to create
more options than the rivals. -
9:01 - 9:06Fujifilm survived because it applied
the principles of prudence, -
9:06 - 9:07diversity
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9:07 - 9:08and adaptation.
-
9:10 - 9:13A catastrophic factory fire,
like the one we see here, -
9:13 - 9:16completely wiped out, in one evening,
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9:17 - 9:23the only plant which supplied Toyota
with valves for car-braking systems. -
9:24 - 9:27The ultimate test of resilience.
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9:28 - 9:31Car production ground
to a screeching halt. -
9:33 - 9:37How was it, then, that Toyota
was able to recover car production? -
9:38 - 9:40Can you imagine how long it took?
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9:40 - 9:42Just five days.
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9:42 - 9:46From having no braking valves
to complete recovery in five days. -
9:47 - 9:48How was this possible?
-
9:49 - 9:54Toyota managed its network of suppliers
in such a collaborative manner -
9:54 - 9:58that it could work very quickly
and smoothly with suppliers -
9:58 - 10:00to repurpose production,
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10:01 - 10:04fill the missing braking valve capacity
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10:04 - 10:07and have car production come online again.
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10:08 - 10:12Toyota applied the principles
of modularity of its supply network, -
10:12 - 10:15embeddedness in an integrated system
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10:15 - 10:19and the functional redundancy
to be able to repurpose, smoothly, -
10:19 - 10:21existing capacity.
-
10:22 - 10:27Now fortunately, few companies
succumb to catastrophic fires. -
10:27 - 10:30But we do read in the newspaper
every day about companies -
10:30 - 10:34succumbing to the disruption
of technology. -
10:35 - 10:39How is it, then, that the consumer
optics giant Essilor -
10:39 - 10:43is able to avoid technology disruption,
and even profit from it? -
10:43 - 10:47And yes, technology disruption
is not only a big deal -
10:47 - 10:49in software and electronics.
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10:50 - 10:54Essilor carefully scans
the competitive environment -
10:54 - 10:57for potentially disruptive technologies.
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10:57 - 11:00It acquires those technologies very early,
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11:00 - 11:04before they've become expensive
or competitors have mobilized around them, -
11:04 - 11:07and it then develops
those technologies itself, -
11:07 - 11:09even at the risk of failure
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11:09 - 11:11or the risk of self-disruption.
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11:12 - 11:15Essilor stays ahead of its game,
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11:15 - 11:17and has delivered spectacular performance
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11:17 - 11:19for over 40 years,
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11:19 - 11:23by using the principles
of prudence and adaptation. -
11:24 - 11:27OK, if these principles are so powerful,
you might be thinking, -
11:28 - 11:31why are they not commonplace in business?
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11:31 - 11:33Why do we not use these words every day?
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11:34 - 11:36Well, change has to first
start in the mind. -
11:36 - 11:38If we think back to our pitch to Bob,
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11:38 - 11:40in order to apply the principles
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11:40 - 11:43that underpin the miracle
of the human immune system, -
11:44 - 11:46we first need to think differently
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11:46 - 11:47about business.
-
11:48 - 11:51Now typically, when we think
about business, -
11:51 - 11:53we use what I call "mechanical thinking."
-
11:54 - 11:56We set goals,
-
11:56 - 11:57we analyze problems,
-
11:57 - 12:00we construct and we adhere to plans,
-
12:00 - 12:01and more than anything else,
-
12:01 - 12:04we stress efficiency
and short-term performance. -
12:04 - 12:06Now, don't get me wrong --
-
12:06 - 12:09this is a splendidly practical
and effective way -
12:09 - 12:11of addressing relatively simple challenges
-
12:11 - 12:13in relatively stable environments.
-
12:14 - 12:17It's the way that Bob -- and probably
many of us, myself included -- -
12:17 - 12:20process most business problems
we're faced with every day. -
12:21 - 12:25In fact, it was a pretty good
mental model for business -- -
12:25 - 12:27overall --
-
12:27 - 12:29until about the mid-1980s,
-
12:29 - 12:32when the conjunction of globalization
-
12:32 - 12:35and a revolution in technology
and telecommunications -
12:35 - 12:37made business far more
dynamic and unpredictable. -
12:37 - 12:41But what about those more dynamic
and unpredictable situations -
12:41 - 12:43that we now increasingly face?
-
12:44 - 12:46I think in addition
to the mechanical thinking, -
12:46 - 12:50we now need to master the art
of biological thinking, -
12:50 - 12:52as embodied by our six principles.
-
12:53 - 12:57In other words, we need to think
more modestly and subtly -
12:57 - 12:59about when and how
-
12:59 - 13:02we can shape, rather than control,
-
13:03 - 13:06unpredictable and complex situations.
-
13:08 - 13:11It's a little like the difference
between throwing a ball -
13:11 - 13:13and releasing a bird.
-
13:14 - 13:16The ball would head in a straight line,
-
13:16 - 13:18probably towards the intended target,
-
13:18 - 13:21and the bird certainly would not.
-
13:23 - 13:25So what do you think?
-
13:25 - 13:28Sounds a little impractical,
a little theoretical, perhaps? -
13:30 - 13:31Not at all.
-
13:32 - 13:34Every small entrepreneurial company
-
13:35 - 13:38naturally thinks and acts biologically.
-
13:38 - 13:40Why?
-
13:40 - 13:42Because it lacks the resources
to shape its environment -
13:42 - 13:44through brute force.
-
13:44 - 13:46It lacks the scale to buffer change,
-
13:47 - 13:50and it's constantly thinking
about the tough odds -
13:50 - 13:53for a start-up to survive.
-
13:55 - 13:56Now, the irony is, of course,
-
13:56 - 14:00that every large company started off
as a small, entrepreneurial company. -
14:00 - 14:01But along the way somewhere,
-
14:01 - 14:05many have lost this ability
to think and act biologically. -
14:07 - 14:10They need to rejuvenate
their ability to think biologically -
14:12 - 14:15in order to survive and thrive
in today's environment. -
14:17 - 14:19So let's not just think
about short-term performance. -
14:20 - 14:23Every company I know spends plenty of time
-
14:23 - 14:25thinking about the central
question of strategy: -
14:25 - 14:27How good is our competitive game?
-
14:28 - 14:30In addition, let's also consider
-
14:30 - 14:34the second, more biological
and equally important question: -
14:34 - 14:37How long will that game last?
-
14:37 - 14:38Thank you very much.
-
14:38 - 14:41(Applause)
- Title:
- How to build a business that lasts 100 years
- Speaker:
- Martin Reeves
- Description:
-
If you want to build a business that lasts, there may be no better place to look for inspiration than your own immune system. Join strategist Martin Reeves as he shares startling statistics about shrinking corporate life spans and explains how executives can apply six principles from living organisms to build resilient businesses that flourish in the face of change.
- Video Language:
- English
- Team:
- closed TED
- Project:
- TEDTalks
- Duration:
- 14:54
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Brian Greene
This transcript was edited on 9/12/16.
At 6:58, the transcript was changed to: "around 1,428 years later."