Wednesday, September 28, 2011

Using evolution to understand the challenges faced by business in the face of web 2.0/GFC and other hard to understand acronyms.

Business analysts are constantly throwing around terms like the ‘web revolution’ and the ‘evolution of social media’ typically right before they ask you to buy something. But, are these metaphors actually useful or are they just the bubble wrap to soften the sales pitch blow?

In my experience the metaphor can be more useful to an organisation than the rest of the presentation and the sales pitch combined. The metaphor that I hear the most is ‘the evolution of social media’ and ‘the evolution of web 2,0’. It irks me, but not because the metaphor isn’t useful, rather because most of the people using it don’t understand evolution well enough to draw out the real lesson.. Evolution is a widely misunderstood concept and one that has been constantly updated revised and improved since Darwin, but it’s core is very simple. Darwins evolution is based on situations where there are too many individuals for a given amount of resources and therefore most die. 

Those that survive to reproduce are those best suited to their environments and they pass on their favourable traits to the next generation. Thus the species changes slowly over time. The parallels to economics are obvious, there is a constant stream of competing organisations in a market that is unable to support all of them. Effective companies thrive, ineffective companies go extinct. It’s not a bad start but it’s based on a highschool understanding of evolution, if we unpack evolution in a more detailed way we can learn a hell of a lot more that can be of practical use to companies in uncertain times and competitive markets.

Not your great great grandfathers evolution

Our understanding of evolution has grown in leaps and bounds since Darwin and is still improving. Punctuated equilibrium is the theory most reflective of the the fossil evidence, the basic concept being that there are long stable periods where there is little change and the short periods of massive changes where new levels of complexity are introduced and the number and types of species is radically altered. There are also five mass extinction events recorded were many species went extinct in short time periods and recovery was slow. Much bloodier and more brutal than what most people picture when they talk about Darwin’s gentle gradual change, and also much more in line with the modern economic climate.

Evolution is at it’s core a mechanical process. Variation + Selection = Evolution, Selection in the absence of variation typically leads to extinction. Just like in business, extinction is by far the most common outcome, with 99.9% of all species that ever lived now being extinct. Winning at evolution is hard and millions of years of ruthless competition has created successful strategies that are of huge benefit in any competitive arena for those patient enough to decipher them. So how much can evolution teach us about commerce in the world of web 2.0? 
let’s look at dinosaurs.

Why the Dinosaurs went extinct   

The dinosaurs were sent extinct by meteor strikes, right? well, yes but not really. The theory is that a large meteor impacted the earth and created a cloud of dust so thick that it decreased decreased global temperatures and photosynthesis worldwide, it also created clouds of acidic gases, megatsunamis and quite possibly gigantic firestorms which is a mite more complicated than dinosaurs getting hit by space bullets but also a lot more useful. There was a stable ecosystem for a long period and just like a stable economic system this meant that certain strategies were favoured and species or organisations that used those strategies tended to dominate. Then everything changed. In biology we call this a shift in selective pressures, tech nerds refer to December 1974, the rest of the world calls it the start of the internet. 

Just like a meteor the Internet is powerful not because of the businesses that it directly replaces but because it changes the environment that all organisations have to compete in, and the changes aren’t simple.Just as it was probably the loss of plants and drop in temperature that sent the dinosaurs extinct it’s the the increased levels of connectivity assocaited with widespread internet use that are changing our environment. Social media and web 2.0 are the meteors of our generation.

Social media is powerful in a way that’s fundamentally biological (more on this in other articles). Humans communication is built on a foundation of evolutionary psychology, the millennium old lizard brain that pushes us to survive and reproduce. As a social animal that is generally pale, weak and useless when alone (that might just be me) social connectivity is crucial for survival. The need to connect with peers and form groups is just as powerful in suburban Sydney and cosmopolitan Paris as it was for our early ancestors who roamed the Savanah. Because it is so fundamental to our nature anything that affects the way we communicate is able to acess our most primitive and most powerful biological drives. How powerful are these drives? They push us to work hard to succeed, determine who we choose to mate with and explain why we can’t all get along. Social media is more than just a facet of the internet, it is web 2.0 and it’s changing the way we connect and communicate. For companies this creates a simple scenario just like it did for the dinosaurs, we have to adapt...... or die. 

But all the dinosaurs died, didn’t they?

Not really, birds are an offshoot of the tree that created dinosaurs, so are modern crocodiles, for that matter we are just a slightly more distant branch. Vertebrates were a diverse groups and whilst many went extinct some were unaffected and some were able to thrive in the new environment and become the dominant species in their ecosystems. 

Just like meteors social media doesn’t affect everyone. Crocodiles are basically the same animal as lived when other dinosaurs were around. In fact the distinction between the massive hugely powerful reptilian predator and dinosaurs isn’t one I’d like to try and justify to a biologist (especially if that biologist is me). Other, smaller, avian dinosaurs survived much the same as they had before the meteors (we call those birds). Some companies will be entirely unaffected by the social media revolution, if your main business is in defence contracts or counterintelligence for example you probably don’t need a facebook page. Nor would I recommend a twitter account for a company specialising in mobility aids for senior citizens, at least not yet. But most of the dinosaurs weren’t crocodiles and most of our companies need to deal with social media.  

But is extinction really that bad?

Most of the large land based dinosaurs were unable to cope in the new conditions whilst smaller warm blooded mammals thrived. Dinosaurs died out, mammals rule the world (and invented pants). This is where we have an advantage over dinosaurs, the strategies that dinosaurs had optimised to allow no longer worked but their collection of new strategies were limited by their biology. Literally how many different types of DNA they carried. The strategies we use in business aren’t limited. New environments mean the rules have changed.

The strategies developed and tested since the industrial revolution can no longer be accepted as fact. We have no idea what works this new environment. Strangely the answer is also found in biology, species can not anticipate meteor strikes, or climatic drift, or the formation of mountain ranges or any of a hundred thousand other things that can change the selective environment rapidly and completely. They don’t try to. Instead species that have survived have done so because of their store of genetic variation, differences in DNA that allow for different variants that may do better in different environments. A huge number of studies both in captivity and in the wild have shown that the more variation the more rapid evolution is and the more a species can change with it’s environment to avoid extinction. Multiple strategies creates multiple opportunities to succeed.

An article by David Silverman in the Havard Business School suggested that powerful and innovative companies were founded during the depression because consumers spending more time thinking about their purchases. I’d agree use evolution to suggest something else, when conditions are tough, be that because a connected world lost it’s shit on the back of bad financial management, or because giant rocks fell from the sky, it does more than create problems. The new environment means that the giants of yesterday have lost their advantages, it’s scramble time and those that scramble the best get to dominate the new environment. That’s just as true for companies that aggressively pursue new strategies and test ideas in the market as it was for mammals which rose to dominate most of the ecosystems on earth. 

But I have to deal with the aftermath of the GFC, now isn’t the time for aggressive or flexible 

If I had a penny for everytime i heard business owners complain about the effect of the GFC I’d put them in a jar and put the jar under my bed, let’s face it, it’s safer than a bank. The GFC was heavily influenced by the speed at which information travels through the world and more important the speed at which the confidence of the community was shaken to it’s core. Speed enabled by the internet and bought home directly by social media. This, for me, is all part of the new ecosystem and we shouldn’t treat it as an isolated event but rather a sign of the increased power and pace of boom-bust circles in the connected world. I like to go back to evolution.

One of the most common misconceptions about evolution is that the size of change determines whether it needs to be adapted to. That’s not actually true. Any change that makes some species do better than others, no matter how small, will certainly send species extinct if they don’t adapt to it. Bigger changes just do it faster. So then the question isn’t even what do we have to do, we have to rethink the way that we do business, but rather how long do we have to come up with sucessful stratergies. It depends.... how powerful do we think social media is? 
It organised the riots in london, toppled the government in egypt and the creation of Justin Beiver as an international megabrand suggest it might be a heavyweight to rival Mike Tyson. That means that those who don’t act fast won’t be around long enough to act at all.

If we view the new environment as an opportunity rather than a burden and move decisively   

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