The Evolution of Successful Enterprises
This convergence across the seemingly separate realms of business and the environment may seem surprising at first, but, as it turns out, the survival rules for finches and for purveyors of mobile telephones (for example) are surprisingly similar.
It is a property of complex, adaptive systems to seek out, evolve into and to exploit new or emerging opportunities in their immediate environment. This is equally true of viruses, human beings, companies and stars, in their respective ecologies.
There is one, significant difference between a simple biological organism (or an inanimate construct like a star) and an organization. A virus or a tree may not have conscious awareness of its environment and, consequently, will be shaped by the environment, more than it is able to shape the environment. On the other hand, an organization has the capacity and may have the will to shape its own evolutionary path.
Thus, in the ecology of organizations the process of “natural” selection may be modified or even replaced by a process of artificial selection. It is open to actors in the ecosystem to define its boundaries, within limits, to suit their own purposes. This is just as well, because evolution is blind, it does not care who wins or who survives - or why.
Smith's belief in the benevolent results that would flow from the actions of “the invisible hand” was perhaps misplaced. Smith's invisible hand, like evolution, is a blind force that does not necessarily result in progress, if progress is defined as improvement. Similarly, evolution may result in extinction or in reversion to an earlier (or “lower”) state, if that is what the environment and chance (or complexity and chaos) combine to produce.
A classic example in the field of technology is the success of VHS over Betamax technology in the manufacture of videocassette recorders. Betamax was technically superior, but VHS was better suited to the commercial environment in which both products had to survive. In the realm of biology, innumerable species have disappeared from the face of the Earth; some, like dinosaurs for example, disappeared after a very long period of existence and evolution. For such species, the culmination of evolutionary progress was extinction.
In the arena of competing nation states, the dramatic collapse of the Eastern European command economies is another example of extinction, in some cases, of reversion in other cases, and of improvement in others. East Germany disappeared altogether, swallowed into a reunified Germany. The Russian economy has barely returned to pre-Yeltsin production levels - and that has been due mainly to oil and gas production, not innovation. Countries like Poland or Hungary are faring much better as capitalist economies than they did as command economies.
The unifying theme is that each of these entities has had to adapt to changing environments, with very differing outcomes, despite shared conditions and common circumstances. It is ever thus for organizations engaged in the world of business, as an analysis of the Fortune 500 lists for the last few decades will illustrate - only a few survive across more than a decade or two.
Whether in nature or in the economy, the changes wrought by natural selection reflect only one value: fitness to survive in a given environment. Ergo, change the environment and ipso facto change the pattern of life, growth and death for all those who inhabit it.
It's the System that Matters
Evolution is about the stability of the system and not the survival of any particular species or ecosystem. The goal of the system is to retain stability in response to destabilizing events or influences. If a wandering comet were to put paid to humanity, as another comet long ago put paid to the dinosaurs, evolution would not mourn our passing. The world would not end; it would just reshape itself. The process of natural selection would ensure that the dominant life forms are those that best fit a post-cometary impact world.
In that world, the surviving species would reshape themselves, each other and the world around them. Just as the world (the new fitness landscape) would shape them.
Organizational behavior can be modified by an internal adaptation that coexists with the forces promoting that adaptation. In doing so, organizations may actually be able to shape or at least modify the future environment and the external forces with which they have to deal. This process of adaptation is what we call learning. With all that, the overriding principle of the theory of Natural Selection applies: over the long term only the fit will survive.
This links with the views advanced by Hamel and Prahalad, who emphasize the importance of cooperation among business organizations, rather than competition. They are critical of the mindset that seeks to improve profitability by identifying costs and cutting them, without any imaginative and forward thinking strategies to grow market share and revenue.
