From the Vault

What Are Learning Organizations, and What Do They Really Do?

Being such an organization is a good thing. Yet even as we use the term, we might not be sure what it means.

This article was originally published on CLOmedia.com in September 2006.

For years we’ve been hearing the term “learning organization” used to describe a company or other entity. It is usually used as a compliment: being such an organization is a good thing. Yet even as we use the term, we might not be sure what it means exactly.

Learning organizations and the people in them learn constantly from everything they do. They use their own experience and that of others to improve their performance. They learn from their successes and also from their failures. Continuous learning is systemically built into the organization’s DNA and infrastructure. The value of continuous learning is espoused, driven and modeled by the CEO and senior management. There is no doubt in every organization member’s mind that continuous learning is expected and will be rewarded.

In a true learning organization, communication is open and widespread, people at all levels are included in most communications and it’s assumed everyone “needs to know.”

Further, senior leaders demonstrate they are learning constantly by communicating what they are learning as they learn; people are rewarded for learning with recognition, growth jobs, promotions and even financial compensation, and people who don’t learn are managed out of the organization.

To be a learning organization provides a competitive advantage: learning organizations are superior competitors, they have brand equity their competitors cannot match, and they attract and retain the best talent.

With all these advantages, one would think that most organizations would strive to be learning organizations. And, in fact, many do.

But to become one is not so easy. Becoming and sustaining a true learning organization requires a lot of work and dedication, and it takes time, energy and resources. Many are thwarted in their attempts to become a learning organization by the press of daily work, inability to persevere, lack of support from the top or the unwillingness to fully commit to the idea.

Yet, despite all these obstacles, we can cite examples of organizations that have been true learning organizations for many years, if not decades. Their long-term success is testimony to the value of continuous learning. Examples include:

  • General Electric: Its Crotonville learning center drives continuous learning by managers and other leaders, as they return to Crotonville to learn and teach at critical transitions in their careers.
  • Goldman Sachs: Its Pine Street learning center provides essential learning to a large segment of its managerial population on an ongoing basis.
  • Pizza Hut: It constantly invents and implements new technology and by recognizing the lifetime value of their customers, it treats them as long-term assets.
  • Honeywell: By applying Six-Sigma approaches, quality is constantly improved, while costs are simultaneously decreased.
  • Microsoft: It successfully made the massive shift in mindset from desktop to Internet when its marketplace changed.
  • Johnson & Johnson: Driven by its famous credo, it constantly improves products and invents new ones, always with the user at the center of its focus.
  • Apple: It perceives unrecognized marketplace needs and creates new products to fill them.
  • Toyota Motor Co.: It uses lean manufacturing and continuous improvement to make small but never-ending improvements in products and processes.
  • USA Today: It invented and kept reinventing publishing technology to move information colorfully and electronically, as well as to manage distribution.

What’s common to all these successful companies is their foundation of solid basic principles and values, as well as their continuous learning to keep them thinking and acting ahead of their competition.

They constantly create markets, market approaches, products and greater customer value constantly, and they never squander the market advantage they have worked so hard to acquire by letting their competition think or act ahead of them or faster than they can.

As long as these companies remain true learning organizations, it’s safe to assume their future success.

So if we want to create a true learning organization, how do we do it? Someone at the top must believe in the value of continuous learning, and senior leaders must clearly communicate the value the organization places in learning by words, and more importantly by their actions.

Senior leaders need to demonstrate how they themselves continuously learn, and they can do so in many ways, including:

  • Personally conduct after-action reviews.
  • Review projects at key junctures.
  • Talk freely about what they are learning from outside the organization’s boundaries.
  • Publicly question others about what they are learning.
  • Work to eliminate any resistance to learning that might appear.
  • Force themselves to stay open to learning, even when business conditions make it difficult.

Structural enablers also should exist to create mechanisms for information transmittal and diffusion such as brief reports, standup meetings, daily e-mails and town meetings, rewarding people for using these mechanisms, and disciplining people who do not and creating central repositories of relevant knowledge.

Some organizations have helped to imbed these structural enablers by creating the position of chief knowledge officer (CKO). This person’s role is to manage information throughout the organization.

He or she oversees the flow of information coming into the organization from across its external boundaries and assures it is directed to where it will be most useful. We most often see this role in intellectual capital companies, such as consulting firms, whose basic products are essentially information.

A CKO is different from a CLO – the CKO assures the collection and dissemination of information, while a CLO is responsible for organization members, learning what is most necessary and useful to them at any given time. Both these roles can be critical to maintaining a learning organization.

The most successful learning organizations perpetuate their advantage by encouraging people at all levels to collect information across all boundaries, being sure that information is shared – not forgotten or hoarded – and encouraging casual information sharing as a way of organizational life. (Advances in electronic media over the past decade or so have made this much easier.)

In the best learning organizations, all employees or members constantly are involved in feedback loops. This means they seek feedback from their colleagues on ideas they have or actions they’ve taken. They routinely give feedback to others and also give “feedforward” ideas and suggestions to their associates on a regular basis. This dynamic activity assures that everyone is learning from everyone else all the time.

Once a true learning organization has been created, continuous learning must become a way of life: It is ingrained into the organizational culture. Once started, learning must not be allowed to slow down or stop.

Examples of other learning organizations that have mastered the art of continuous learning and product adaptation include:

  • Southwest Airlines: built on innovative concepts for its industry (point-to-point travel, no assigned seats, rapid loyalty rewards, etc.), it continues to thrive by constant innovation and an unflappable commitment to customer service.
  • Intel: based on its cultural norm of “paranoid collaboration,” it continues to outrun its many competitors by constant new product development and occasionally redefining its industry.
  • Cisco Systems: building on the huge base of its installed products, it encourages and rewards creative thinking, which allows it to stay ahead of its imitators.
  • Wal-Mart: entering a market niche which already existed (Costco, Target, Kmart, etc.), it has taken ownership of the low-price segment by constantly inventing new sourcing and distribution practices. It leverages its rapid growth to obtain always more favorable costs from its suppliers, which in turn allows lower prices at retail.
  • Charles Schwab: the first to define its market niche, it has continued to innovate practices attractive to the individual investor. Quick to perceive new market needs, it strives to be the “first mover” to offer new products to the investment community.
  • Disney: based on a few unchangeable core values (family entertainment, high quality, ethical but still hard-nosed business practices), Disney continues to invent new forms of entertainment. Its ability to recruit and retain the best talent allows for creativity that surpasses its competitors’ products: film, music, television or theme parks.
  • Dell: Its founding business concept of assembling computers to order and delivering them very quickly has not only persevered but allowed the company to expand successfully into markets other than personal computers. It has learned how to be equally successful in the commercial marketplace (servers, etc.), and continue to innovate attractive new products for that market.

All these companies were built on unique premises, and they have flourished because they never stopped learning and moving forward into new frontiers related to their core premise. Other companies have not fared so well, largely because they stopped learning at some point in their history.

Examples include:

  • The American railroads (Amtrak).
  • Followers in the oil industry (Gulf, Amoco).
  • Greyhound Bus Co.
  • Followers in the computer industry (RCA, Compaq).
  • The Great Atlantic and Pacific Tea Company (A&P).
  • Woolworth’s, Kmart and some department stores.

What causes companies to stop learning? Many phenomena come into play here, and most are rooted in the company’s culture and the leadership of senior executives.

For some companies that fall behind, it is the result of life just being too good. They nigh own the market for their products, have high profit margins, have no competitors of any consequence and have no new competitive products on the horizon.

Consequently, the organization sees no reason to continue to learn – people in the company relax and enjoy their good fortune. This is the perfect recipe for disaster because their lack of market sensitivity makes them blind to new challengers, and by the time they wake up to the danger, it is usually too late to respond effectively.

For other companies that cease to learn, it is the result of senior leaders turning their attention away from the realities of their marketplace – many executives would prefer to see their world as they’d like it to be rather than as it really is.

This lessening of their attention is quickly reflected in all the organization’s members, who look to their senior executives to set the patterns for all employees’ mindsets and behaviors. Once learning begins to atrophy in the company, it is very difficult, if not impossible, to re-instill a learning mindset in all employees.

Yet another reason for the decline of organizational learning can be reverence for products or markets that have been immensely successful in the past but are about to be displaced by a major discontinuity in the market environment.

Past successes cause leaders to be blinded to the quantum change, and they deny they are happening. While they continue to pursue the products and markets that have been successful, upstart competitors are busy making advances into the new markets.

Examples of this phenomenon are IBM’s missing the turn from mainframes to personal computers and Kodak missing the massive shift from film imaging to digital photography. Fortunately, IBM has recovered and now offers attractive products to the changed marketplace, but Kodak still struggles to the point that its very survival as a free-standing company might be at risk.

For all companies and organizations, at some point in their history, survival might depend on becoming a learning organization. Efforts to move in that direction are never wasted, and in fact, they might help guarantee the survival of ideas, products and jobs for their members.

There might be no clearer example of this than the problems facing the American auto industry today – it has not appeared to learn from changes in its marketplace or from the success of their non-American competitors. This lack of learning might prove fatal, unless the auto industry can “learn to learn” more efficiently in the future.

The U.S. auto industry’s plight provides for all organizations a model of why continuous learning is so critical, and what can happen if learning is ignored or not pursued vigorously enough.

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