During attritive economic times, luck alone does not determine which organizations survive and which become extinct. There is a process of Survival of the Fittest that takes place, to where those who are most attuned to the economic climate, business culture and consumer trends live on to fight another day.
While this perspective highlights the importance of “fitness” to a given environment, the true crucial feature is adaptability itself. As an example, let’s say that we lived in a business culture to where consumers only sought out the biggest and most recognizable names in a given industry. The organizations hauling in the largest profits and making the most notable expansions are able to hoard the market, whereas organizations earning slim margins on low-risk projects are simply flooding the market and are bound to die off.
Under these hypothetical circumstances, many people might be tempted to laud companies that use aggressive portfolio management. While it is obviously true that organizations inherently built to be more aggressive are fittest for survival in this environment, this isn’t necessarily the organization we should emulate. They may survive under these hypothetical circumstances, but if times were to shift to a climate of intolerance, then that very same organization would be taking foolish risks and would be in grave danger of becoming extinct.
The organization with the true lasting power is the one that adjusts their portfolio approach as a conscious response to the environment—the organization that recognizes the aggressive environment, develops a strategy for how they can maximize return on their portfolio, and then invests in a high risk/high return fashion. With a set process like this in place to adapt to any environment, they are much better to survive as the economy, technology and culture of their time changes all around them.
This, in fact, has been seen in our own species’ evolution. The survival of our genetic strings with a unique capacity for thought is the result of a turbulent ecology in Africa about 2 million years ago. Around this time, the climate and landscape of Africa alternated between woodland and grassland half a dozen times over the course of 200,000 years. With the varying climates, eratic food sources and inconsistent availability of water, the determining factor for survival didn’t come down to simple dichotomies, such as fur versus no fur or grass-eater versus fruit-eater. These static qualities were falling in and out of favor too quickly to sustain a species. It was our human ancestors’ ability to use tools, clothes and shelters in a way to fit with whatever environment happened to exist at the time that allowed our species to prosper.
As that example illustrates, adaptability becomes especially important during turbulent times. The massive dinosaurs relied far too heavily on leafy vegetation. Not only did their size demand that they have an abundant food source, but they also had a sole reliance on one food source. There were two main classes of dinosaurs: the herbavores, who could not live without leafy vegetation, and the carnivores, who could not live without feeding on the herbavores, which made them indirectly reliant on the vegetation.
Regardless, they were able to live on for millions of years, since there is no inherent disadvantage in eating leafy vegetation. But once a meteor the size of Texas hit the earth during the tertiary period, dust filled the atmposphere, which obscured the sunlight, which killed off the vegetation, and the dinosaurs were unable to sustain their immensity. It was the dinosaurs’ lack of ability to adapt their diet that doomed them. Smaller species with more flexible diets lived on, able to sustain themselves in both the environents of pre-meteor and post-meteor.
The economic downturn of 2009 is much like that meteor. We now operate within the New Normal, which will continue kill off all those organizations that are unable to adapt to a new climate of intolerance.
In our post on Change Methodology, we illustrate a proven process for effectively driving change in your organization so that you may prevail through turmoils of all shapes and sizes.