The Hindu Business Line : Adapt or die...

Just as evolutionary history tells us that the fittest species survived because they were able to adapt to change, so should corporations in a changing business environment.

IN Darwin's theory, evolution was characterised as a gradual process in which all species went through changes at regular intervals. On examination of fossils, though, it was found that in reality evolution is punctuated. That is, crises in the environment, natural or self-imposed, demanded that species adapt or die.

Today, we are facing similar crises in business. Billions of dollars are being spent on change management. Yet most successful organisations cannot keep pace with their more nimble competitors. That which is targeted to change, remains unchanged. More is required by less. Organisations are required to cannibalise or be eaten...

These and several other paradoxes indicate that the business environment is demanding that corporations change their way of operating. Through evolutionary history, those species that did survive did so because they were able to adapt to their environment. They proved to be complex adaptive systems. They thrived on disequilibrium and chaos, and changed themselves to enter a new relationship with the environment. There are lessons to be learned from behaving as complex adaptive systems.

If an organisation operates as a `material' level complex adaptive system, then it is tied to the past, and to what may have once made it successful. Its world consists of known customers, known products, known markets, known processes and structure, and known strategies. Innovation is about `tweaking' and about moving within the boundaries that have already established what it is. An organisation centred at this level has a limited number of options to choose from when confronted with change. Change itself is engineered as though the world is fixed, and therefore any efforts are only incremental, within the confines of the described world. To the degree that an organisation centred at this level can call on attitudes and strategies that are centred at the higher levels, it will likely be able to function far more successfully than an organisation that perceives and acts in the world solely from a material perspective.

An organisation operating as a `financial' level complex adaptive system has more degrees of freedom. Being centred in financial results, whether ROI, sales, or market share, it is not necessarily bound to the world that has made it successful. It is not necessarily bound by past markets, customers, products, processes, structures or strategies. It has the added flexibility of changing any of these to ensure that it meets its specified financial goals. Yet, if it were required to go through a quantum change, as is being required by many organisations today, it runs the risk of becoming extinct so long as it remains insistently focused on meeting its imposed financial goals. It is to be noted that organisations operating at this level do embody all the positive capacities of the previous, material, level. At the same time, to the degree that an organisation centred at this level can call on attitudes and strategies that are centred at the conceptual level, it will likely be able to function far more successfully than an organisation that perceives and acts in the world solely from a financial or a financial-material perspective.

An organisation operating as a `conceptual' level complex adaptive system is not bound by its past. It has more degrees of freedom, and is in essence more fluid and adaptive than any form that precedes it. It seizes on ideas and will change its customers, products, markets, processes, structures and/or strategies to ensure that these ideas can be fulfilled. It too, has the knowhow and capability of all the previous levels embedded into it. Thus, material and financial capabilities are deeply embedded or easily available to it.

An organisation operating as an `intuitional' level complex adaptive system is perhaps fulfilling some deep need, possibly far beyond what it might even imagine. As such, it has opened to deep forces of formation, and is bound only by its ability to give the receiving intuition a form. At such a level of operation old, accepted ways of organising may prove inadequate or incomplete, and the organisation may have to conduct its operations in new, virgin forms. Such an organisation is deeply creative and perhaps becomes the model by which many other organisations develop. Examples of organisations at each of these levels follow:

An example of focused material-level operation, to the point where it becomes restrictive, is that as exercised by the US rail industry. They wanted to continue to provide rail services, even though others had begun to provide transport services, and therefore signed their own death warrant.

Another example of the material-level operation is that of a company in the `typewriter' business. Computers now provide all the capabilities provided by a typewriter, and a lot more. Any company that insists on providing typewriters will soon be wiped out.

An example of financial-level operation is that of Barnes & Nobles. When Amazon.com actually began following through on its vision of becoming the largest bookstore on the planet, Barnes & Nobles, threatened by its diminishing market share, spun off barnesandnobles.com. Their motivation was simply to regain lost market share. If, instead, they had moved to an ambition at the concept-based level, they may have been able to reinvent the retailing industry by being the first truly click-and-mortar type company.

Another example of an enterprise operating at the financial level is Covisint, the e-marketplace joint effort between General Motors, Ford, and DaimlerChrysler. While Covisint had the possibility of being a concept-led play, in reality it has been motivated by a vision that is at a less empowering financial level. Thus, to avoid the continuing costs of ongoing battles and pains associated with continuing to support their own auto-parts marketplaces against the efforts of other competitors in the same space, the Covisint principals decided to join forces to come up with a joint auto-parts marketplace. Since their motivation has been driven by the financial level, they have been unable to step up to the broader concept-led leadership required to bring such a venture to successful fruition. Thus, from the word `Go', they have been attended by a host of problems starting from the inability to come up with a mutually acceptable name for the project, to the ongoing difficulty in selecting the right technology platform, to the potentially crippling inability to really bring their suppliers along. These leadership problems had been further compounded by the Federal Trade Commission's concern that the combined purchasing power of the automakers could be anti-competitive for suppliers.

An example of a concept-led company is that of Amazon.com. At its inception it sought to create the world's largest virtual bookstore. It sought to allow the user to browse titles in the comfort of their home, while allowing users to view online reviews by other readers. They shipped books to buyers at prices compatible with or less than those available at its competitors. Its concept for selling books was so different from existing sellers of books that investors allowed it to continue in operation for five years before it has even begun to show a profit. Further, it drew investors to its unique concepts, and through the funds that became available to them was able to quickly mobilise capabilities at the previous level - material and financial.

Another example of a concept-led organisation is that of Aravind Eye Care System. Note that this is not a business organisation, and therefore the inclusion on this scale is tenuous, but done, nonetheless, to provide a rough indication of what different levels of operation may mean. Aravind Eye Care System has grown organically, without upfront planning, and has assumed a unique practical shape, with a reach into the village level unparalleled by any other organisation. This reach has assisted it in creating a unique culture through the young village girls who join Aravind to become its nurses, and the backbone of the organisation. This reach also allows Aravind to provide service to numerous blind throughout Southern India. It is driven by the vision and idea of its founder, and there is an adhesion to this vision, even though circumstance and time go on. In this sense it remains concept-led. To the best of the author's knowledge companies at the intuitive level do not exist, though several may be in formation, driven by the vision of their leaders.

An organisation should thus, be centred at the higher levels. This then provides it with the flexibility and living-quality to become an effective organisation constantly fulfilling real needs. It thus becomes imperative to create a culture whereby there is always a push to the higher levels. As such, proactive actions and reactive measures need to be taken at every instance to ensure that every part of the organisation is operating with the highest degrees of freedom available to it.

(The writer is a computer scientist and management consultant by training and profession. Founder of Aurosoorya, he has consulted with several prominent organisations.)

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