It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change. ~Charles Darwin
In 1975 I left behind my Ph.D. degree in marine biology and ventured, unsuspectingly and very naively, into the world of commerce and business, first for a training company and then as co-founder of an international management consulting firm. Building a business from nothing is all-consuming and for the next 25 years I rarely thought about biology, nature and evolution, except for those rare holidays taken in Africa, the Caribbean or fishing in Alaska. Work was my full-time focus (maybe too much so) at the time and we grew our consulting firm rapidly.
When I semi-retired in 2000 I had the luxury to slow down, stop running for airplanes and taxis, and reflect on a few of the many lessons learned over the past 25 years. It was instructive and insightful and even though I am back in the world of consulting working with CEOs and senior leadership teams on strategy execution and culture change, I have taken many of the insights gained from my past education as a biologist into the world of business and organisation effectiveness, as well as lessons in leadership.
One of these lessons has to do with economic stability, complexity and the growth of a business.
There is great benefit from building and running a business in a stable and somewhat predictable period of economic prosperity, such as the world experienced between theend of WWII and the most recent global financial meltdown in 2008. A few small recessionary cycles along the way notwithstanding, this was a period of tremendous growth in the global economy. Rates of growth were positive and predictable in most industries and many businesses thrived and grew large in size (and also highly complex) and very profitable during these times. The globalisation of the financial services industry and the telecoms industry is just one example, with large global players emerging and employing large numbers of people doing all sorts of jobs, many in management.
In nature we find an analogous situation in the tropics, where the stability of the environment (temperature, humidity, rainfall, daylight) have given rise to an enormous number and diversity of species and highly complex ecological adaptations. Take Orchids for example. The number of orchid species equals more than twice the number of bird species, and about four times the number of mammal species. The Orchid family also encompasses about 10% of all seed plants. And the complexity of their life cycles is staggering, especially their interaction with specific bees, butterflies, other insects and even certain mammals.
In numerous species of orchids, the life cycle is so complex that they are only pollinated by one single species of insect. For example, the “bee orchids” have evolved not only a shape and coloration to mimic a female bee, but they also produce an odor exactly similar to that of a female bee; all to attract the male bee to climb inside the orchid, where a special part of the flower loaded with pollen springs loose and attaches itself to the back of the male bee. When the male bee then goes to another flower and crawls inside, he deposits the pollen to fertilize the orchid flower.
All this took millions of years to evolve and was only accomplished in a stable environment. Large fluctuations in temperature, rainfall, etc. would have never allowed such a complex biological interaction to have developed. We don’t find nearly the complexity or diversity of plant and animal species in the more variable ecological environments, like the temperate zones.
So, back to business. Businesses also can also grow large and complex during times of economic prosperity. For example, during the build up of coalition forces in Iraq and later in Afghanistan, military and defense contractors experienced a bonanza in sales and orders, especially for military vehicles that could withstand the hard and rugged desert environments, as well as protect soldiers from roadside bombs and IEDs (Improvised Explosive Devices).
Sales were booming and the factories were full. No need to market or hunt for sales, the order book was full of long-term contracts. And during boom times, most companies slowly add layers of management and staff. Large profits allow for investment is all sorts of projects that in lean times couldn’t be funded. Complex and cumbersome management organisations evolved, such as Matrix management and other organisation design schemes, to manage the many complex programs and initiatives going on. Overhead rates began to climb, but since profit margins were high, no one seemed too worried about these excess costs. The result, complex systems with lots of human beings required to manage them. It was a time of managers managing managers, in abundance.
But the global economy is not stable. When the economy “went south” in 2008, many firms with complex structures and thick layers of management could not adapt fast enough. Complexity requires stability and predictability. Variable environments and a changing global economy require rapid adaptability. If the tropics suddenly encounter large variations in temperature, rainfall or humidity, many of the highly evolved and complex species would not be able to adapt fast enough and would perish. The same is true of overly complex organisations with large management structures. Many go out of business or become acquisition or turnaround candidates.
So, the lesson in all this? The global economy is not stable. It is not the tropical rain forest. To continue to thrive and survive, companies must become lean and adaptive at all times. The boom times don’t last so don’t be fooled into adding layers of management and reducing discipline and risk assessments, which was the downfall of the large banks (article by Demetrie Comnas).
The most effective business organisations are those that develop a culture of rapid adaptability and quick response to external changes. When the good times are around, profits soar. When the economy is troubled, they are able to shift and change accordingly.
Two things can help develop a culture of rapid adaptability in an organisation: transparency of information across functional boundaries, and employee engagement. Want to explore this subject further? Take a look at FASTBREAK: The CEO’s Guide to Strategy Execution.
Tight Lines . . .
John R Childress
See the review of LEVERAGE in The Economist (January 9, 2014.