Recently in our Strategy course we evaluated the concept of strategic evolution in addressing the question of how an organization can best structure itself in order to maximize its competitive advantage. As someone with a background in the life sciences, after having spent an intensive month so far covering topics such as management, governance, and finance, I confess I was particularly pleased to come across some old but familiar concepts from studies of biological evolution and ecology. What I found striking was the degree of relevance they had to the business world. In essence, the same problem is posed to any system (whether it be an organism or an organization) that must compete with other systems for limited resources: What is the best way to balance between becoming specialized to a niche to maximize profit and remaining generalized enough to preserve the ability to quickly adapt in case the environment changes? It makes sense to look for lessons from biology, which has had eons to work on this very problem through the process of natural selection.
One well-studied example of this is the story of the peppered moth in the UK. Prior to the industrial revolution in the 1800’s, the peppered moth looked, well, peppered – with sprinklings of light and dark patches on its wings as camouflage to match the lichen-covered trees and stone buildings they lived amongst. Most of these moths had similar light-colored markings; only a small fraction of them born were significantly darker than the others due to natural genetic variability. However, these darker ones were easily spotted amongst the light-colored environment and were typically picked off by predators before they could reproduce.
With the industrial revolution, trees and buildings near major cities in the UK became noticeably darkened from the soot emitted by coal-burning factories. The change in the environment favored the dark-colored moths over the light-colored moths. It was now the light-colored moths who stood out amongst the background and were soon picked off by predators, while the darker ones survived to reproduce. By the late 1800’s the majority of the peppered-moths around industrial cities were dark-colored. They had become, through the process of natural selection, highly adapted or “specialized” to their environment.
Now imagine what happened when they eventually cleaned up the soot? The environment quickly became much lighter. Those dark moths that had just a little while ago been so well-adapted and successful now stood out amongst the light marble, stones, and trees of the city. Those that had been the most fit for the environment were again the least fit and their numbers were again reduced by predators and so on.
So, what can the adaptation and survival of the peppered moth tell us about optimal strategies in business?
1. Specialization allows you to thrive but may come at a cost if the environment changes.
2. To reduce those costs, maintain some intrinsic variability in order to adapt as quickly as possible to a new environment.
3. Unfortunately, the optimal amount of intrinsic variability is hard to know. In biology, the answer seems to be “just enough” and is likely a function of the degree of potential change in the environment constrained by the amount physically tolerable by the organism.
4. It doesn’t always work. Although the moths endured, there are plenty of examples of species (and companies) that have gone extinct because environmental changes outpaced their innate ability to adapt.
5. Think ahead. These moths were fortunate to have had enough intrinsic variability to allow them to endure the selective pressures that were put upon them since they weren’t able to predict nor prevent the industrial revolution from happening. While there may be forces beyond our control that will ultimately shape our futures as well, we also have nice big brains that allow us to have, hopefully, a more active role in our own future in the choices we make as individuals, organizations, and as a species. We can stay informed about changes in our environment and find ways to influence and predict them. We can diversify our businesses more or less depending upon the degree of those predicted changes. We can make a best guess. It isn’t easy and there are no guarantees, but that is the challenge of life, both in biology and in business.
For more information and photo sources, visit http://en.wikipedia.org/wiki/Peppered_moth_evolution