Business adaptation

Rafe Sagarin blogs at the Harvard Business Review:

All of Earth’s successful organisms have thrived without analyzing past crises or trying to predict the next one. They haven’t held “planning exercises” or created “predictive frameworks.” Instead, they’ve adapted. Adaptability is the power to detect and respond to change in the world, no matter how surprising or inconvenient it may be.

While there’s much chatter in the management world about the need to be adaptable, only a few creative companies and innovative managers have probed the natural world for its adaptability secrets. But when they have, they’ve been remarkably successful. A study of nature offers straightforward guidance through four key practices of adaptable systems.

Sagarin’s four practices are decentralisation, redundancy, symbiotic relationships and recursive processes.

I’m sympathetic to the idea that businesses might benefit by experimenting more (small failures) and taking advantage of the collective wisdom of their employees. But there is one fundamental difference between a business wanting to be adaptable and the operation of natural selection in nature. Evolution does not work through each organism surviving no matter what the circumstances. Rather, a few selected organisms that are more adapted to the current environment will have higher fitness and form the population of the future. Each individual organism does not actually adapt. This concept was the part of Tim Harford’s Adapt that I thought was done particularly well.

As a result, carrying a costly trait on the possibility that it might be required in the future is perilous in evolutionary terms. Even though we see some organisms carrying redundant features, evolution tends to eliminate costly traits if they are not required, or more particularly, those individuals still possessing the costly traits.

Thus, when Sagarin suggests that if a business want to be “adaptable” it needs to “make multiple copies of everything and modify the copies to hedge against uncertainty”, we need to consider the costs. What happens when the business with built-in redundancy runs into the lean business that ignores all of Sagarin’s advice but hits on the right answer?

Consider Silicon Valley, with thousands of start-ups experimenting with various ideas. Some succeed, most fail. This is natural selection in action. For a large tech player, there is no way to replicate the massive experimentation that these startups are conducting. If they do experiment and cover all possible bases, they are carrying much larger costs than the single company that lucks onto the right idea. By carrying those costs, will the experimenting company be able to beat the experimentation of the broader market in the long-run?

As a result, Sagarin’s advice to build in redundancy is no guarantee of success. Businesses could learn from nature, and becoming more adaptable may yield benefits. But nature also suggests that, ultimately, a business will fail (as have over 99 per cent of species that have been on this earth) as it simply cannot efficiently replicate the experimentation of the broader market place.