In this article we will discuss about The Learning Organisation. Learn about:- 1. Meaning and Characteristics of Learning Organisation 2. Building Blocks of a Learning Organisation 3. Traditional vs. Learning Organisations 4. How to Create Learning Organisations 5. Fortune at the Bottom of the Pyramid.

The Learning Organisation: Characteristics, Importance and How to Create a Learning Organisation

Meaning and Characteristics of Learning Organisation:

“The learning organisation may be defined as one in which everyone is engaged in identifying and solving problems, enabling the organisation to continuously experi­ment, change and improve—thus increasing its capacity to grow, learn and achieve its purpose”.

According to Peter Senge, adapting to environmental changes is not enough to survive and flourish in the economic jungle. Organisations have to antic­ipate and learn from change.

The focus of such learning organisations must be on continuous experimentation, finding new ways of creating products and services and serve customers better than rivals double-loop, generative learning.


Learning organisations, typically, have the following Characteristics:

(i) Creative Problem Solving:

The essential idea is problem solving, as against the traditional organisation designed for efficiency. In a learning organisation all employees look for problems, such as understanding the unique requirements of customers. Employees also solve problems, by finding novel, innovative and creative ways to meet the demands of customers.

(ii) Disciplined Thinking:


In a learning organisation people engage in disciplined thinking. They do not rely on guesswork or assumptions. They develop a critical eye for detail and based their decisions on factual information.

(iii) Learn from Anything and Everything:

They constantly look for new knowledge and ways to apply it. They look for expanding horizons or opportunities rather than finding quick fixes to current problems. They carefully review both successes and failures. The intent is to look for lessons and learn from mistakes.

(iv) Emulate the Best Practices:


Learning organisations, typically, identify and implement the best business practices of other—excellently run—organisations. Of course, they steal ideas shamelessly. They make sure that new ideas are acted upon and knowledge is shared throughout the organisation without any reservations.

A learning organisation has both the drive and the capabilities to improve its performance continuously based on experience. It tries to add value to customers by identifying new needs and then developing innovative ways to satisfy those needs. In fact, it learns from past experiences, it learns from customers, it learns from various parts of the company and it learns from other companies.

In learning organisations, innovation and change are not infrequent and special—they are simply a way of organisational life. Learning organisations rely on factual data and keep experimenting in order to improve productivity and efficiency levels and remain at the top. They try to learn from the past. They emulate the best and learn from the-

1. Boeing is the best example of a learning organisation. Because of problems with the development of its 737 and 747 planes, Boeing initiated a three- year project to compare the development of these planes to the earlier, more reliable 707 and 727 planes. This project resulted in a booklet of ‘lessons learned’ which was then used in the development and manufacture of the 757 and 767.


Learning organisations routinely use benchmarking to scale new heights. Benchmarking refers to a process whereby companies find out how others do something better than they do and then try to imitate or improve on it. Nissan, General Mills, United Airlines and many others have used benchmarking in the past to achieve performance improvement.

2. IBM studied Las Vegas casinos for ways to discourage employee theft. Many hospitals have benchmarked their admissions processes against Marriott Hotels. And Giordano Holdings Ltd., a Hong Kong based manufacturer and retailer of mass market casual wear, borrowed its ‘good quality, good value’ concept from Marks & Spencer, used Limited Brands to benchmark its point- of-sales computerized information system and modelled its simplified product offerings on McDonald’s menu!

Building Blocks of a Learning Organisation:

The important elements of a learning organisation may be presented thus:

(a) Shared Vision:


To create a shared vision, large numbers of people within the organisation must draft it, empowering them to create a single image of the future. All members of the organisation must understand, share and contrib­ute to the vision for it to become reality. With a shared vision, people will do things because they want to/ not because they have to.

(b) Shared Leadership:

In a learning organisation, everyone is encouraged to find ways to improve the organisation and its products. Everyone is entitled to a share of the pie—in terms of making decisions, directing operations and achieving organisational goals.

(c) Team Based Structure:


Learning organisations rely on a team based structure greatly. Self-directed teams consisting of employees with diverse skills rotate jobs to produce an entire product or service; they directly deal with custom­ers; make changes and improvements as they get going.

Team members have the authority to make decisions about new ways of doing things. Virtually bosses are non-existent and team members take responsibility for training, safety, scheduling vacations; decisions about work methods, pay and reward systems; and coordination with other teams.

(d) Open Information:

People share information openly and freely. Everyone is armed with data about budgets, profits and departmental expenses. Every­one is free to look at the books and exchange information with anyone in the company.


(e) Employee Empowerment:

Employees are empowered to do everything that helps the organisation directly or indirectly. Empowerment means giving employees the power, freedom, knowledge and skills to make decisions and perform effectively.

In learning organisations employees are encouraged to react quickly to changing circumstances. There are few rules and procedures and knowledge and control of tasks are located with workers rather than top managers.

(f) Customer Focused Strategy:

Learning organisations add value for customers by identifying needs—in some cases even before customers have done so—and then developing ways to satisfy those needs.

(g) Culture of innovation:


Companies like Sony, 3M and Toyota are highly inno­vative because they take novel ideas and turn them into profitable products and work methods. Learning organisations encourage employees to come out with novel ideas and suggestions.

Employees are allowed to experiment, find a solution to the problem and remain accountable for results. Mistakes are tolerated, as long as the employee shows willingness to learn from these and move on.

(h) Systems Thinking:

The cornerstone of any learning organisation is the fifth discipline – systems thinking. This is the ability to see the bigger picture, to look at the interrelationships of a system as opposed to simple cause-effect chains; allowing continuous processes to be studied rather than single snap­shots.

The essential properties of a system are not determined by the sum of its parts but by the process of interactions between those parts. This is the reason systems thinking is fundamental to any learning organisation.

Traditional vs. Learning Organisations:

Why learning organisations are gaining importance especially in the context of managing change intelligently is given below:


Traditional Organisations:

(a) Determina­tion of overall direction- Vision is provided by top management.

(b) Formulation and imple­mentation of ideas- Top management decides what is to be done, and the rest of the organisation acts on these ideas.

(c) Nature of organisational thinking- Each person is responsible for his or her own job responsibilities, and the focus is on developing individual competence.

(d) Conflict reso­lution- Conflicts are resolved through the use of power and hierarchical influence.

(e) Leadership and motivation- The role of the leader is to establish the organisation’s vision, provide rewards and punishments as appropriate, and maintain overall control of employee activities.


Learning Organisations:

(a) Determina­tion of overall direction- There is a shared vision that can emerge from many places, but top management is responsible for ensuring that this vision exists and is nurtured.

(b) Formulation and imple­mentation of ideas- Formulation and implementation of ideas take place at all levels of the organisation.

(c) Nature of organisational thinking-Personnel understand their own jobs as well as the way in which their own work interrelates and influences that of other personnel.

(d) Conflict reso­lution- Conflicts are resolved through the use of collaborative learning and the integration of diverse viewpoints of personnel through the organisations.

(e) Leadership and motivation- The role of the leader is to build a shared vision, empower the personnel, inspire commitment, and encourage effective decision making throughout the enterprise through the use of empowerment and charismatic leadership.

How to Create a Learning Organisations?


Creating a learning organisation is not an easy job.

It requires consistent support and continued blessings from top management in the following ways:

1. Top Leadership:

It requires foresight, imagination and commitment on the part of top management—in allowing people to put their best foot forward without any fear of having committed a mistake. Top leadership must encour­age everyone to go that extra mile and find novel solutions to knotty issues confronting an organisation repeatedly.

2. Employees Willing to go that Extra Mile:

Everyone should be encouraged to find ways to improve the organisation and its products. Top management must also encourage people to experiment with new ideas and thinking. At South West Airlines the CEO Herb Kelleher encouraged the idea of doing away with tickets for passengers wholeheartedly when it was suggested by the clerical staff.


Long before other airlines adopted the idea of electronic ticketing, Southwest Airlines passengers made reservations over the phone and received only a PIN number—no ticket was issued. At the gate, the PIN number was exchanged for a boarding pass. Passengers who needed a receipt got one promptly through the mail.

3. Share Knowledge with Others:

In a learning organisation people must share their expertise, ideas, knowledge with colleagues actively and enthusiastically. Employees should cooperate because they want to, not because they have to. They should be happily sharing their solutions with coworkers whenever and wherever required.

4. Employee Empowerment:

For a learning organisation to happen, people must be empowered fully. They should be made responsible for problem finding as well as problem solving. This is where teams come to play a major role in learning organisations.

5. Customer-Focused Strategy:

Above all, for a learning organisation it is important to put a customer focused strategy in place. Learning organisations add value for customer by identifying needs—in some instances, even before customers have done so—and then developing ways to satisfy those needs

6. Organic Organisation Design:

Learning organisations need to put emphasis on organic designs in place of mechanistic systems. The emphasis, invariably, must be on the use of teams, strategic alliances and boundary less networks.

Fortune at the Bottom of the Pyramid:

For a painfully long time the poor have received very little attention from the private enterprise. The assumption was that they do not have the capacity to buy products which are meant basically for the middle class and the rich. They are not brand conscious, technology-savvy, nor value-seeking consumers.

They are ready to take whatever comes their way. C.K. Prahalad & Stuart L. Hart offered a novel view of the bottom of the pyramid (BOP) segment in late 90s through a series of articles in Harvard Business Review and later in the form of a book tilted—For­tune at the Bottom of the Pyramid.

The principal theme of the book is that ‘if we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up.’

MNCs and private enterprises, according to Prahalad, should come out with prod­ucts and services that help the 4 billion people living at the bottom of the pyramid enjoy the fruits of progress.

The key ideas of the book, Fortune at the Bottom of the Pyramid, may be summarized thus:

1. Huge Opportunity:

The BOP (bottom of the pyramid) segment consists of an estimated 4-5 billion people who live at below $2 per day. They represent latent market for goods and services. If MNCs and private enterprises realize this and focus attention on the BOP segment seriously, there is an excellent opportunity for everyone to grow and flourish in a competitive world. BOP can become a major engine of growth and global trade.

This market has its own set of characteristics which are as under:

a. Money:

The dominant assumption is there is very little money to be made in the BOP market. The reality is that BOP offers huge opportunity to make money since the segment consists of huge numbers.

b. Distribution:

The dominant assumption is that distribution access to BOP segment is very difficult and hence a major hurdle for large firms to participate in a meaningful way. The reality is different. With urba­nization, Labour migration to cities has already happened and it is not that difficult to put distribution logistics in place.

c. Brand Consciousness:

The third dominant assumption is that the poor are not brand-conscious. On the contrary, the poor are very brand-con­scious. They are also extremely value conscious by necessity.

d. Other Assumptions:

It is believed that BOP consumers are not connected and are not ready to accept products that are technologically superior and somewhat expensive. This, of course, is not true as BOP consumers are getting connected and networked. They are readily exploiting the benefits of information networks. Again, contrary to popular belief, the BOP consumers accept advanced technology readily.

2. Market Development:

The challenge, therefore, is to convert the poor into consumers through market development. Companies must empower the poor by offering latest products at affordable prices. They need to create opportunities for BOP consumers to earn more and consume more.

Private sector must treat the BOP as an excellent opportunity to serve the poor with great attention and focus (instead of concentrating effort only on the middle class and rich sections of population). This way the BOP consumers get what they want and the private enterprise getting a fair share of a growing market relatively easily—which has been missing traditionally.

3. Product Development and Innovations:

BOP market requires products and services that match the expectations of the low income segment. As a result, businesses must come forward with single serving packages of shampoos, detergent powders and miniature oil, milk and cola bottles etc. Such products need to be priced right and offered in every corner of the country so that there are no distribution related hurdles.

4. Small is Beautiful:

Prahalad argued that small can be beautiful because small packages are more affordable, they encourage consumption and provide a choice for the poor. Single serve packaging encourages the poor to enjoy lat­est products at an affordable price (biscuits, jam, washing powder, sanitary napkins, milk powder, shampoo etc.).

The lower unit prices encourage massive consumption and help MNCs and private enterprises to penetrate markets that have largely remained dormant and unexploited. By addressing the BOP, Prahalad and Stuart Hart argued that they can curtail poverty and improve the living conditions of the world’s poorest.


Many feel that the size of the market that Prahalad was talking about does not exist, simply because the poor lack the purchasing power. MNCs, again, may have to incur huge costs in creating and selling products for the BOP segment at rock bottom prices -because small volumes with very little margins does not augur well in the long run.

The BOP segment would spend 60 per cent on food and about 20 per cent on clothing, leaving very little for other items—putting a question mark over the whole idea of a huge untapped market at the bottom of the pyramid.

It may simply prove to be a mirage and the more MNCs try to come out with single serve offerings, the more they are going to lose—in terms of advertising, promot­ing, distributing uneconomical lots at unaffordable prices.

Again, the argument that the poor are savvy, value-conscious consumers does not hold good when we see that most of them actually are not educated enough to even draw the curtain between good and bad quality small packages.

Further, Prahalad’s insistence that the quality of the product should not be sacrificed in making cost adjustments to meet the BOP segment’s needs may become a hindrance, not a help at all.

Critics argue that, unless existing producers are all incompetent or grossly inefficient, the only way to significantly reduce prices is to reduce quality, or else to achieve significant improvements in technology.

According to Karnani, University of Michigan, Nirma is a demonstrably inferior product to some of the alternative detergents on the market, such as Surf. It was hard on the skin, and could sometimes cause blisters. And yet it retailed at a third of the price of its competitors, and achieved majority market share from consumers for whom the tradeoff between price and quality was one that they were happy to make.

He concludes- “Insisting on not lowering the quality actually hurts the poor by depriving them of a product they could afford and would like to buy”. Karnani further argues that rather than focusing on the poor as consumers, we need to view the poor as producers.

The only way to help the poor is to raise the real income of the poor, either by lowering prices through lowering quality to provide goods that meet real needs, or through raising the income that the poor earn.