Chapter 2. Adapt or Die
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The 2020s would have come as a nasty shock to anyone who thought the world was a predictable place. Yet, anyone who thought the world was predictable probably hadn’t been paying attention. In this short 21st century planes appearing ‘out of a clear blue sky’ sparked a series of wars globally, while a spike in loan defaults on the west coast of America triggered a global financial crisis. Edward Lorenz was right[1] — small causes can trigger large, over-sized consequences. This is why the future remains uncertain and the only inevitability is unpredictable change. Change therefore is something we’re going to have to learn to deal with better. Understanding it is the first step.
‘The Adaptive Cycle’[2] (see fig. 5) describes how change occurs in the natural world (of which we humans, of course, are also a part):
- Successful actors in an ecosystem (ex, animals in a natural habitat, businesses in an economy) enjoy a long period where they conserve their previous dominance (K)
- But when a shock hits this tightly-coupled (and highly-efficient) system there’s a sudden release of previously trapped potential (Ω)
- Actors in the ecosystem must now start to re-organise to adapt to the new conditions (ɑ)
- Some fail to do this and don’t survive (X)
- However, those that exploit the new sources of value most effectively will not only survive but also thrive (r). They will then seek to conserve their new found dominance (K) — until another shock hits the system again and the cycle repeats.
Fig. 5: The Adaptive Cycle
The Adaptive Cycle explains our planet’s changing pre-history. Earth was once lush in mega-fauna, which dinosaurs were best able to exploit (r). Growing to enormous size they could eat whatever, (or whoever) they wanted and conserved (K) their status as the planet’s dominant species for millions of years. Then a shock hit: A large comet struck Earth, we believe, sixty-six million years ago triggering a collapse in the planet’s tightly-connected ecosystem and wiping out 75% of all species, including the dinosaurs. Yet these changes also saw the release (Ω) of new potential: ‘Unoccupied ecological real estate’ that could sustain life. To exploit these empty niches species had to re-organise (ɑ) and adapt to the new conditions. None adapted better than the early mammals.
Mammals appeared 200 million years ago, around the same time as the dinosaurs but, as a species way down on the food chain, they had to rely on whatever food sources they could find. This resulted in mammals remaining small compared to most dinosaurs that had first choice on what to eat. Yet these early limitations on mammals (no single food source and being small) became competitive advantages when the ecosystem changed. Their small size made mammals more energy efficient, so when food became scarce the could more easily survive on less. And having unfussy diets meant that when old food sources disappeared they were better able to adapt to new sources. In contrast dinosaurs[3] — who had become optimised to an ecosystem that was disappearing (relatively) fast — struggled to adapt to the new conditions. Over 10 million years they slowly became as extinct as the ecosystem they relied on collapsed. Eventually their status as the planet’s dominant species was taken by the mammals — humans.
The Adaptive Cycle however is ‘more than just a metaphor’[4] for explaining change in natural systems: It describes the recurring pattern of the rise and fall of dominant players in human systems as well. For example, in November 2007 Forbes magazine ran a front cover about Nokia that posed the question: With “one billion customers — can anyone can catch the cell phone king?” Yet, just seven years later the market share of the ‘cell phone king’ had fallen to zero. Nokia had been the dominant player in the world of Symbian mobile phones but earlier that year Apple had launched the i-phone — a ‘comet-like’ event for the world of smartphones — that ushered in a new era that Nokia failed to adapt to. They went the way of the dinosaurs — only much, much quicker.
Fig. 6: ‘Can anyone catch the cell phone king?’ Forbes (Nov 2007)
Let’s explore this example using The Adaptive Cycle. Despite the shock of the i-phone’s release earlier in the year Nokia still had considerable power (50% of the global share of smartphone sales) that it sought to conserve. Yet smaller actors — those devoid of power and with nothing to lose — started to explore the new potential that had been released (ex, apps and mobile computing). These experiments uncovered new ways of doing things that had largely been impossible before (ex, mobile shopping or banking). These new, exciting possibilities attracted that rare source of talent — innovators, or people who want to explore tomorrow’s world, rather than maintaining yesterday’s. These new actors started to organise themselves in radically different ways in order to exploit the new opportunities (ex, flexible working, agile techniques). And financial capital — itself often an early adopter, driven by the desire for greater future returns — recognised the potential in these new sources of value and started to invest heavily, which reinforced the emerging changes. A period of creative destruction had now been unleashed.
At first the dominant players, like Nokia, ignored these changes as they were taking place at the periphery of their world. But when they belatedly recognised the big shift taking place (as customers sought the new at the expense of the old) and then tried to go ‘all-in’ on the new they found that the talent and finance needed to make this work were in short supply and therefore prohibitively expensive to attract, while any copycat offerings they could launch might be dismissed as inferior imitations, which is not a good look for a market leader. Nokia’s inability to adapt in time had led them to a precipitous crash.
Fig. 7: The Precipitous Crash of the “Cell Phone King”
When we look back at the history of the 2020s we may see it as a series of comet-level shocks that impacted every industry and every institution across the planet. New niches were already visible within a year of CoVid hitting: A shift from physically-located employees to working from home; from in-person business travel to remote events; and from debates about work-life balance to a more determined focus on looking after one’s mental health. By the pandemic’s second year a challenge to the political order in some countries was emerging: Populations expressing anger at their governments’ handling of the pandemic, eroding trust in them and institutions (like the media) closely connected to them.
The natural response of the dominant players to the disruption of the 2020s has, so far, been to try and conserve the status quo (that favours them) by promising to ‘build back better’ — if only people will return to the office and carry on as before. But, if you look closely at the Adaptive Cycle, you will see that the arrows of change only run in one direction. This means that, once new sources of potential have been released and pioneering talent has re-organised itself to exploit the new opportunities, there’s no going back. Therefore, everyone has one choice: Adapt, (by embracing the change) or fight against evolution (and risk going the way of the dinosaurs and Nokia’s mobile phone business). This is why Simon Wardley (more on him later) argued that “the single most important factor for any company in this time will be the imagination and willingness of executives to adapt to the change”[5]. What kind of executive you are, or what kind of executive you work for, is going to matter greatly moving forward.
Introduction to Part One — Why Best Practices Hold You Back
Chapter 1 — Forget Strategic Plans!
Chapter 3 — Pal’chinskii’s Principles
Chapter 4 — Ashby’s Law of Requisite Variety
Chapter 5 — FujiFilm: Innovating Out of a Crisis
Chapter 6 — Honda B: Miscalculations and Mistakes
Chapter 7 — Honda-Yamaha War of Natural Selection
Chapter 8 — The Eastern Approach to Strategy
1 See introduction for a brief recap of the story of Edward Lorenz.
2 Resilience and Adaptive Cycles. C. S. Holling and Lance H. Gunderson (2002) p.27
3 With the exception of the avians, which evolved into modern birds.
4 The adaptive cycle: More than a metaphor. Sundstrom and Allen (2019)
https://www.sciencedirect.com/science/article/pii/S1476945X1830165X
5 https://swardley.medium.com/the-great-division-87a58e8d3709
