Musings on Entrepreneurship and Innovation
Friday, June 08, 2007Building Adaptive Capacity
Since last September, I've been making a series of posts that describes innovation through the lens of the evolutionary algorithm. I've struggled to reach some definitive conclusions regarding ways in which companies might build their adaptive capacity. I suspect that I will continue to struggle. Nevertheless, my research and experience points toward a consistent set of ideas that offer promising avenues of exploration:
- Uncertainty is the dominant characteristic of the social and, hence, business world. Consequently, business strategy must necesssarily be contingent. We should work hard on imagining a full range of possible futures in order to anticipate, reduce the shock of surprise, and accelerate our appropriate response to new information.
- In order to increase flexibility, it makes sense to organize our capabilities in a modular fashion. That is really hard, because it forces us to acknowledge and understand interdependencies (in order to reduce them) and define and manage interfaces between modules (in order to get them to work together). The upside is that modularity facilitates reconfigurability, which means that we can do new and different things by recombining existing capacities in new ways.
- Core and contingent capabilities should be complementary. Our ability to do something depends capacities accumulated over time. Consequently, it makes sense to think about how to leverage existing capacities than to default to having to build new capacities from scratch (or acquire others' capacities at a premium).
- The future never arrives, so anticipating the future is a dynamic and iterative process. Furthermore, pacing and industry clockspeed are probably even more important than you think. The Red Queen is a demanding taskmistress.
Others have written far more eloquently and persuasively on these topics than I'm capable of doing. So, I've appended this post with a bibliography of some of the books to which I find myself referring on a regular basis.
I began this series of posts by quoting Orgel's Second Rule: Evolution is cleverer than you are. I continue to be humbled by how the process of innovation is much, much cleverer than me. That has pointed me toward the following set of personal objectives:
- Innovate, innovate, innovate. As Paul Oremerod concludes, "It is the best strategy for individual survival, and it is a strategy from which we all, as consumers and citizens, have benefited immensely."
- Adopt a strategy of humility. Prediction is a fool's game; we don't know as much as we think we know.
- Aspire to wisdom. As Jeffrey Pfeffer and Bob Sutton suggest, "Be confident enough to act on the best knowledge you have now, humble enough to doubt what you know, and wise enough to face the hard facts when new - and better - evidence comes along."
- Practice your own norms of adaptive behavior.
For further reading, I recommend the following (in no particular order):
The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
The Only Sustainable Edge: Why Business Strategy Depends on Productive Friction and Dynamic Specialization
The Strategy Paradox: Why Committing to Success Leads to Failure (and What to Do About It)
Why Most Things Fail: Evolution, Extinction & Economics
20|20 Foresight: Crafting Strategies in an Uncertain World
Adaptive Enterprise: Creating and Leading Sense-and-Respond Organizations
How Breakthroughs Happen: The Surprising Truth About How Companies Innovate
Six Degrees: The Science of a Connected Age
The Modern Firm: Organizational Design for Performance and Growth
