Moving Forward in a Changing Landscape

14 Sep

Post by Expedite

Posted in: Human Resource, Working Futures

Moving Forward in a Changing Landscape

Before I begin hypothesising on the startling parallels between the natural and business worlds, I probably need to outline my credentials in making such observations. Although today I am a business owner, it was not always so. I actually spent many years working as a biologist and conservationist, happy times indeed if not the most financially rewarding. I also have a military background, and so it was natural to begin to combine experience in the outdoors with knowledge of leading groups, which in turn led to acting as a consultant for businesses large and small about team dynamics. Fast forward a couple of decades, and I now run Seadog Productions, making wildlife and adventure films, something that is as much mired in the whims of the business world as any other (despite the oft held impression that it consists entirely of wearing trousers with pockets on the thighs, and having your hair stroked by large gorillas).

I have just returned from a long stint in the Galapagos Islands, the birthplace – of course – of evolutionary theory when Charles Darwin visited the archipelago in 1835. As I returned from my own visit in late 2017 – arriving in a world convulsed by Brexit, by Trump, by escalating trade wars, and by economic uncertainty – it dawned on me just how relevant the power of evolution remains in a business sense. The ability to adapt and change direction with prevailing conditions, and so to remain competitive, is as key to survival to a small business as it is to a marine iguana. Any business is beset by the winds of change, by shifts in the landscape and environment in which it operates. Some changes are subtle, creeping up at what might be described as evolutionary pace, and others are more sudden, requiring dramatic changes of direction to ensure survival.

And already we arrive at the essence of this article and this argument – the startling parallels between ecosystems in the natural world, and of surviving and prospering in the business environment. So let’s start from the beginning, the emergence of a new market and the boundless opportunities that represents. For anyone in business or with a hint of the entrepreneurial spirit, these are exciting times indeed. It’s well worth exploring how mother nature exploits these opportunities, having done so for hundreds of millions of years, and learning what we can from the way she operates.

 

Establishing A Foothold:

Let us imagine for a moment an entirely barren landscape, a new volcanic island that has just emerged from a fiery, frothing ocean. Nothing lives on it, it is inhospitable, entirely devoid of life. But it is full of promise, a patch of hard ground in a featureless ocean, a prize piece of real estate for anything that flies, creeps, or grows. Colonisation is swift, indiscriminate, and random, arriving on current, wind, and wave.

The parallels with a new market are obvious. A new territory or technology, little understood, but representing a prime opportunity to all and sundry for new business, for empire building. When these new markets emerge, there is frequently a “gold rush” mentality, a hasty land-grab, where no-one fully understands the stakes, but instead operates on a hunch that here is a rare opportunity to “get in early” and make your mark.

The result – in economic terms – is often a “bubble”. Perhaps the most famous in recent history is the Dot-Com Bubble of the 1990s. The rapid development of the internet triggered a massive wave of speculation in “New Economy” businesses, and as a result, hundreds of dot-com companies achieved multi-billion dollar valuations as soon as they went public. The NASDAQ Composite, home to most of these technology / dot-com companies, soared from a level of under 500 at the beginning of 1990 to a peak of over 5,000 in March 2000. The resultant crash was inevitable, but the frenzy of colonisation of this new territory saw entrepreneurs of every stripe clamouring for a piece of this precious new turf.

The stages of colonisation of a new island follow a standard pattern. This was established by two legendary biologists – MacArthur and Wilson – in the US in the early 1960’s. They fumigated several mangrove islands, and reduced them to lifeless husks (these were, to say the least, different times scientifically). Having ensured that there was literally no living thing remaining, they retired to observe the patterns of recolonisation on the new island.

What they observed over the next few years was a classic “Forming, Storming, Performing, Norming” model. Initially it was a free for all, and somewhat Utopian, as plants and animals arrived and settled in. Some died almost immediately (the entrepreneurs with no knowledge, the dreamers, the fantasists), but some prevailed, and established a foothold in this new environment (the hardy, the well-resourced, and those suited through previous experience). This was the forming stage.

As the island grew more populous, and the various species gained a true foothold, then an ecosystem became established. It was viable, growing, and dynamic. The new market was open for business.

 

The Market Becomes Competitive:

Soon the island became a bustling place, with limited space occupied by a large range of species, and so we come to the storming stage.

But MacArthur and Wilson noted an interesting phenomenon quickly emerge. Plainly, if two similar species are competing for exactly the same resource (and – crucially – that resource is limited) one will out-compete the other. This will result in the demise of the less capable species (the parallels with the business world here are so obvious that they need not be highlighted). But the scientists noticed that competing species quickly altered their behaviour to ensure their survival – a phenomenon called “niche differentiation”.

Take, for example, the Anolis lizard. This splendid little reptile – of which there are several separate species – occupies the canopy of the rainforests of Central America. It eats insects, and several species co-exist in what appears to be perfect harmony. But it wasn’t always this way – in the past the different Anolis lizards ate precisely the same insects at precisely the same time of day in precisely the same level of the canopy – the result was direct competition, and whenever direct competition occurs, there will be winners and losers.

The losers in this case – outcompeted by stronger, faster, more capable Anolis lizards – simply switched strategy. They ate insects at night instead of during the day. They ate at a different level of the canopy. They ate different insect species altogether. It took a while for all of this to sort itself out (forming, then storming) but eventually “niche differentiation” occurred, and everyone bumbled along entirely happy in their green economy – making a living, but not directly competing. Such are the wonders of evolution.

This “point of difference” is key to ensure survival in highly competitive commercial environments. Either you are the biggest and strongest (unlikely), or resources are unlimited (unheard of), or you discover a USP, something that allows you to exploit a particular niche. That niche, needless to say, should play to your strengths.

A classic contemporary example of this is Netflix. Only established in 1997, it was regarded with scorn by the larger traditional broadcasters – and indeed could not possibly compete in this regard. Such was the scorn for this interloper, when the boss of Blockbusters, John Antioco, was offered the chance to buy it outright for $50 million in 2000, he turned it down as he considered it “a very niche business”. It now operates in 190 countries worldwide and has 125 million subscribers.

 

A Changing World:

Eventually MacArthur and Wilson’s island settled into what is termed “dynamic equilibrium”. This means that although everything appears to occupy a separate niche, and are co-existing in relative harmony, periodically one species will try to move into another’s niche. This effectively constitutes a take-over bid, an aggressive move on a competitor. Either the move is successful, or it fails, but the result is invariably a period of friction and stress – a time when the resilience and expertise of both species are tested to the full.

One CEO, contributing to a Harvard study on the impact of takeovers, described how within 30 hours he assembled a team of more than 150 specialists, including investment bankers, management consultants, attorneys, accountants, as well as staff from his company, to analyse a prospective acquisition. Only a few of these people had worked together before, and the entire process lasted six days. The result was – inevitably – huge stress at impending change.

But some changes affect the entire island, and nothing within the ecosystem is safe. These might be environmental (climate change, rising sea level, or depletion of a key foodstuff) or more apocalyptic (a huge storm, or the arrival of two flame-thrower wielding scientists).  Both require adaptation of course, the first on a gradual basis (at evolutionary speed), the second a sudden change in behaviour to ensure survival (at revolutionary speed).

The first is a factor that should loom large for every business, large or small. Indeed, this is perhaps one of the major advantages a small business has over a larger one – the ability to quickly change behaviour, to rapidly adapt and evolve as the environment in which they operate changes. Larger business inevitably makes such changes at a slower pace, and in extreme cases this can result in their demise. But of course, these larger businesses have the resilience of scale, and with it the ability to survive events that will destroy a smaller entity completely.

Perhaps the most famous example off this is Louis Gerstner Jr’s transformation of IBM in the early to mid-1990’s. As a company they were facing a meltdown of epic proportions – one of the largest in American corporate history – due to the sudden and (for them) apocalyptic arrival of desktop computing technology. As a company that specialised in main-frame computers, their inability to change before Gerstner’s arrival nearly led to their demise, and his transformation of their culture and operating model is one of the great stories of corporate leadership. The full tale of Gerstner’s remarkable accomplishments is told in his book “Who Says Elephants Can’t Dance?” – a seminal work for anyone keen to embrace a culture of change in their own business.

There is a reasonable argument that we are facing a potentially apocalyptic environment in the years ahead. The combination of a shambolic Brexit and a rapidly escalating trade war between the US and China could create a perfect economic storm. Of course, it might also open up new markets for the fleet of foot, those that can change behaviour quickly, and explore new niches that develop in real time around them.

 

Evolution In Action:

It’s a fact of life that most of us don’t run large multi-nationals, and so are vulnerable to both changes in the business environment, and to apocalyptic events. But we do have the great advantage of being reactive, of seeking trends and quickly changing our behaviour to make the most of those trends. In the words of Charles Darwin himself:

“It is not the strongest that survive, nor the most intelligent. It is those with the ability to adapt to change.”

By way of an example, my sector is the media and has changed radically in the last few years. The environment on our particular island has shifted dramatically, to the point that a number of the big tuskers – overly confident in their ability to weather any storm – have become ‘extinct’ due to their inability or unwillingness to accept change (think Kodak, Blockbuster and Blackberry)… Whereas before it was enough to simply pitch ideas for television programmes and films, now we live in a true multi-platform world, where “content” (it’s no longer programming, it’s content….) is viewed on hand held devices in every walk of life (eight in ten adults in the UK use catch-up technology such as BBC iPlayer, or subscription services such as Netflix). And so, change has been required, with swift evolution essential to adapt to what is a new island ecosystem.  An inability to do so – as was pointed out by a gleeful young You Tube exec at a major television conference – will see the slow adopters “go the way of the dinosaurs”. As such the disruptors, the new companies with energy, vigour, and a willingness to adopt and adapt rapidly emerging technology, have emerged as a driving force. We may be small, and operating at ground level, but that’s where you hear the tremors of approaching change first.

I will close this article by using two examples of evolution in action. The first is here – our old showreel from a mere eighteen months ago. It is classically tv orientated and reflects the environment in which we had operated and grown for so many years. The second is here, and reflects the new ecosystem on our island today, one that is changing at dazzling pace. A bend in the road is only a problem if you have an inability to turn, and I’d suggest that here lies our great competitive advantage as small to medium businesses.

I began this article by referring to the parallels between the natural and the business worlds. The mammoth died out because it ate only one species of grass – it was a specialist in a generalist world. IBM nearly met its untimely demise because it only made main frame computers in an increasingly desktop environment. Kodak disappeared because it refused to acknowledge digital technology. We are mere shrews in comparison, scuttling around at the feet of dinosaurs, but with our ability to sniff the air, to twist and turn, to change at a moment’s notice in the face of what may be tectonic events over the next few years, we may well inherit the earth.