Irving Wladawsky-Berger

Corporate Survival: Lessons from Biology

Having lived through IBM’s near-death experience in the early 1990s, respect for the forces of the marketplace is edged deep in my psyche.  It’s frankly sobering how many once powerful IT companies are no longer around or are shadows of their former selves.  The carnage might be more pronounced in the fast-changing IT industry, but no industry is immune.  It would seem as if darwinian principles apply in business almost as much as they do in biology. 

A few weeks ago I discussed a paper published last year, The Mortality of Companies, by physicist Geoffrey West and his collaborators at the Santa Fe Institute.  Based on their extensive analysis of data about publicly traded US companies, they were surprised to discover that a typical firm lasts about ten years before it gets merged, acquired or liquidated, and that a firm’s mortality rate is independent of its age, how well established it is or what it does.  While beyond the scope of their study, the authors speculated that biological ecosystems are likely to shed valuable insights into their findings.

Such similarities between business and biological ecosystems was the focus of The Biology of Corporate Survival, a paper recently published in the Harvard Business Review (HBR) by Martin Reeves, Simon Levin, and Daichi Ueda. 

“Some business thinkers have argued that companies are like biological species and have tried to extract business lessons from biology, with uneven success,” note the authors.  “We stress that companies are identical to biological species in an important respect: Both are what’s known as complex adaptive systems.  Therefore, the principles that confer robustness in these systems, whether natural or manmade, are directly applicable to business.”

The (Uneven) Digitization of the US Economy

Digital technologies are all around us, - increasingly ubiquitous and commoditized.  But, are they a major source of competitive differentiation?  Are they still a strategic value to business?  Can digital innovation drive long term economic growth?

Several weeks ago, the McKinsey’s Global Institute (MGI) published a report addressing these questions.  Digital America: A tale of the haves and have-mores aims to quantify the state of digitization of the US economy.  The report introduces the MGI Industry Digitization Index, a methodology for exploring the various ways US companies are going about their digital journey, - based on 27 indicators that measure how they’re building digital assets, expanding digital usage, and creating a digital workforce.

“Digital innovation, adoption, and usage are evolving at a supercharged pace across the US economy,” notes the report in its opening paragraph. “As successive waves of innovation expand the definition of what is possible, the most sophisticated users have pulled far ahead of everyone else in the race to keep up with technology and devise the most effective business uses for it.”

Let me discuss a few of the findings in this extensive report.

The Blockchain and Open Innovation

Transformational innovations don’t always play out as originally envisioned.  Once in the marketplace, they seem to acquire a life of their own.  Lest we forget, the Internet started out as a DARPA sponsored project aimed at developing a robust, fault-tolerant computer network.  ARPANET was launched in 1969, and by the mid-1980s, it had grown and evolved into NSFNET, a network widely used in the academic and research communities.  And, the World Wide Web was first developed by Tim Berners-Lee at CERN in the late 1980s to facilitate the sharing of information among researchers around the world.  They’ve both gone on to change the world, - to say the least.

The blockchain first came to light around 2008 as the architecture underpinning bitcoin, the best known and most widely held digital currency.  But, as with the Internet, the Web and other major technologies, the blockchain has now transcended its original objective.  It has the potential to revolutionize the finance industry and transform many aspects of the digital economy. 

Two press announcements released in mid-December are serious milestones in its evolution.  Let me explain.

Why People and Companies Die While Cities Keep Growing

The Winter issue of strategy+business includes a very interesting article on theoretical physicist Geoffrey West, - The Fortune 500 Teller.  Dr. West is Distinguished Professor and Past President of the Santa Fe Institute (SFI), a non-profit research institute dedicated to the study of complex systems.  Prior to joining the SFI in 2003, he was the leader and founder of the high energy physics group at Los Alamos National Lab.

About 20 years ago, West got interested in whether some of the techniques and principles from the world of physics could be applied to complex biological and social systems.  In particular, he wondered if we could apply empirical, quantifiable and predictive scientific methods to help us better understand complex biological organisms and social organizations like cities and companies.

In the 1990s, his attention first turned to biology.  There are enormous variations in the characteristics of living creatures, their live spans, pulse rates, metabolism, and so on.  How do these characteristics change with body size?  Why do human beings live roughly 80 to 100 years, while mice live only two to three years.  Are there some common principles that apply to all living creatures regardless of size?  Can we find empirical mathematical models that might allow scientists to ask big questions about life, aging and death?