Darwinian principles seem to apply in business almost as much as in biology. After analyzing the longevity of more than 30,000 public US firms over a 50-year span, Martin Reeves, Simon Levin, and Daichi Ueda noted in a 2016 HBR article, The Biology of Corporate Survival, that companies are disappearing faster than ever before. “Public companies have a one in three chance of being delisted in the next five years, whether because of bankruptcy, liquidation, M&A, or other causes. That’s six times the delisting rate of companies 40 years ago… Neither scale nor experience guards against an early demise.”
Biological systems have long been an inspiration in the study of complex systems. In their HBR article, the authors argued that companies are not just like biological species, but in some important respects they’re actually identical to biological species. Companies and biological systems are both what’s known as complex adaptive systems, that is, systems in which a perfect understanding of their individual components does not automatically lead to a perfect understanding of their overall system behavior.
Companies are an example of sociotechnical systems, that is, systems that have to deal with complex technologies and infrastructures, and the even more complex issues associated with human and organizational behaviors. Other examples include cities, government agencies, industries and economies. The dynamic nature of their technology and human components, as well as their intricate interrelationships renders such systems increasingly unpredictable and accounts for their emergent behavior and unintended consequences.
In a subsequent 2017 article, Think Biologically: Messy Management for a Complex World, Reeves, Levin and Ueda wrote about the application of biological thinking to the management of companies in a fast changing, global environment. “To succeed over the long run, business leaders must rely not only on the traditional mechanical approach to management, - which seeks to direct a company toward desired outcomes by engineering processes and controlling the behavior of its various components. They must also learn a biological approach, which acknowledges the uncertainty and complexity of business problems and so addresses them indirectly.”
A classic, mechanical approach to management works well in situations that are fairly stable, relatively simple, and predictable over the near term, such as a production factory, incremental improvements to a well understood product or service, and sales and financial operations when the company is doing well and meeting its targets. But it doesn’t work in situations where the company is neither fully controllable nor predictable, either because of serious near term issues or because disruptive technologies, changing market conditions or new global competitors make the business environment even more complex and harder to anticipate. Instead of specific techniques or actions, managers should master six fundamental principles of biological thinking.
Resilience, Rather Than Efficiency. Increased efficiency is the primary objective of operational management, whose benefits are immediate and visible. But a quest for high robustness, - the essence of evolution and natural selection, - is the key principle behind biological thinking. High robustness in uncertain environments is critical for complex engineering designs, e.g., an airplane, a skyscraper, the Internet. Similarly, high robustness is fundamental to long term business management for a company to adapt and survive in an unpredictable future.
I first learned about the importance of robustness to natural and man-made systems at a 2007 seminar by Cal Tech professor John Doyle. He explained that robustness can be viewed as the attempt by nature or humans to organize and bring order to complexity. There’s a continuing struggle between complexity and robustness in both evolution and human design. A kind of survival imperative, whether in biology, engineering, or business requires that simple, fragile systems become more robust. But the mechanisms to increase robustness will in turn make the system considerably more complex. Furthermore, that additional complexity brings with it its own unanticipated failure modes, which are corrected over time with additional robust mechanisms, which then further add to the complexity of the system, and so on.
This balancing act between complexity and robustness is never done. The very same mechanisms that provide robustness in a system will allow for, or even facilitate fragilities to emerge. As the system then attempts to deal with these new fragilities, it can in principle get into a robustness-fragility spiral that can challenge its own survival. One of the most important biological mechanisms, for example, is the immune system, which guards against disease. But the immune system is subject to its own serious diseases, such as immunodeficiencies when its activity is abnormally slow, and autoimmunities, which are caused by a hyperactive immune system.
These inherent tradeoffs between robustness and fragility represent one of the most fundamental challenges as we attempt to develop complex systems and organizations that can survive, adapt and evolve when subject to unanticipated events - including those they themselves have helped precipitate.
Holism, Rather Than Reductionism. Reductionism attempts to deal with an entire system or institution by decomposing them into their individual constituent parts. It’s a well established, natural step in the problem-solving process in science and engineering, as well as in the management of complex organizations.
Reductionism works quite well in systems whose components are fairly stable and interact infrequently using well established protocols. But it often fails in complex systems where the whole is far from the sum of their parts. Instead of being stable, their components will exhibit a high degree of variance, - as is the case with the behavior of people in sociotechnical systems, - and their dynamic nature lies in the convoluted interactions between between their components, leading to feedback loops, side effects, unindented consequences and emergent, unpredictable behaviors.
Plurality, Rather Than Universality. Diversity is key to evolutionary adaptation in biology. Similarly, diversity of people, ideas and endeavors increases the flexibility of business systems, helping them adapt to unpredictable changes from within or outside their industry that might obsolete their business models. While diverse points of view might decrease short-term efficiency, they’re absolutely essential for a company’s survival in the longer term, because their competing viewpoints provide for constant growth and rejuvenation.
In addition, a commitment to innovation is essential. While It may not always help the business stay out of serious trouble, anticipating major changes and understanding its various options will help the company adapt to new market realities. Doing so effectively requires the kind of leadership that will attract and retain the best possible talent and create a culture of innovation that encourages them to come up with creative solutions to the challenges the firm faces.
Let me briefly summarize the last three principles of biological thinking:
Pragmatism, Rather Than Intellectualism - “Managers must acknowledge that things often work before we can explain why.”;
Experimentation, Rather Than Deduction - “Biological management… demands getting your hands dirty and tinkering more often than it demands analyzing and theorizing.”; and
Indirect, Rather Than Direct Approaches - “Acting on structure, goals, mindset, and other contextual drivers may seem unacceptably “soft,” but these levers are often more effective than direct levers in the long run.”
“The biological approach makes management messy, iterative, and even counterintuitive and harder to articulate,” write the authors in conclusion. “Nevertheless, it is also a boon: it allows managers to tinker, to experiment, and to find solutions amid complexity. Biological management also draws on the initiative and diversity of people and liberates them from being mere instruments in mechanical processes - it is thus ultimately a more humanistic approach to management.”
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