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The evolution of management

Tue, 29th Oct 2019

 

The theme of this year’s Global Peter Drucker Forum in November is ‘business ecosystems’. That might look suspiciously like a fad or fashion. But although not everyone has yet realised it, it is a depth-charge under current management convention. Briefly, by substituting a biological metaphor for the current mechanical, numbers-driven version, it puts the ‘man’, not to mention ‘woman’, back at the heart of management, gives the company back its role as the engine of social progress and changes its imperative from maximising its own returns to doing its best for the system as a whole.
It also, just as intriguingly, brings into play the idea of evolution. As in nature, business ecosystems – fluid networks, often cross-industry, of partly competing, partly cooperating companies that come together to supply customer ‘jobs to be done’ in novel ways – evolve, sometimes in unpredictable directions. They can’t be managed directly: they can only be nudged. But what they lose in controllability they gain in potential scope. At the launch of the first iPhone in 2007, Steve Jobs, ever the control freak, wanted to keep it as a walled garden and only reluctantly opened up the Apple Store to outside developers. But that was the spark that lit an explosion of innovation. Twelve years on, iPhone users can choose between 2m apps offered by 500,000 developers, to whom Apple shelled out $27bn last year. As well as its other firsts, Apple had invented the first modern platform ecosystem. 
Some economists and management thinkers have toyed with the notion of evolution. Joseph Schumpeter saw ‘creative destruction’ as the evolutionary process that propelled the economy forward. In her monumental book on surveillance capitalism, Shoshana Zuboff portrays the latter as a chance mutation of capitalism hit upon by Google which from small beginnings has spread at breakneck speed and is now supported by an ever-expanding ecosystem of its own. Evolutionary psychologists like Nigel Nicholson at LBS have catalogued how modern management techniques systematically cut across the grain of human nature, which is one reason why so many workplaces are uncomfortable and dispiriting places to work.
Much more ambitious is the project of prominent evolutionary biologist David Sloan Wilson, who in a new book called This View of Life argues that all science should be informed by an ‘evolutionary worldview’ – that is, social sciences as well as biological ones (indeed, he insists that at bottom the social sciences are biological. The subtitle of his book is Completing the Darwinian Revolution; one of his chapters is 'Policy as a Branch of Biology'). 
For the author, neo-liberal economics is a relic of pre-Darwinian 19th century thinking about the nature of the universe, having more in common with religion than science. After all, the prescription ‘laissez faire’, or ‘hands off’, only makes sense if nature, or an economy, is harmonious and self-ordering, and human nature immutable – two propositions that have no scientific basis. Yet here is the source of the economists’ foundational idea of the invisible hand delivering public welfare from the doggedly self-interested behaviour of the individual.
In reality evolution, the nearest thing to a perpetual motion machine, is constantly throwing up mutations to be tested by natural selection. It is always on the move, for good or less good (eg  the declining effectiveness of antibiotics). One of the adaptations that proved advantageous in early human life was the ability to combine forces in small groups to hunt large animals or later to plant crops and defend territory – a real evolutionary advance. In those groups, the individualistic behaviours that had benefited individuals became an evolutionary disadvantage. ‘If there is anything that evolution teaches us, it is that the pursuit of lower-level self-interest does not automatically benefit the common good,’ notes Wilson.
We are hard-wired to live in and find meaning in small groups (one reason why loneliness is so damaging). Hard-wiring evolves only slowly. But, to oversimplify, evolution has cleverly developed supplementary processes of cultural adaptation and learning that are efficient superchargers to the genetic variety. Cultural evolution explains the astonishing speed at which human societies have developed from isolated groups of savannah dwellers into ever-larger units – villages, cities, provinces, culminating in mega-nations such as China and the US, pan-national groupings such as the EU, and even prototype global organisations like the UN: all this in no more than 10,000 years, the blink of an eye in evolutionary terms. These are huge evolutionary shifts, each move to a higher level offering greater fruits of cooperation but requiring more sensitive forms of governance to reach them. They are all hard won, with many a backward step before the next stage is reached; and, as we observe all too clearly today, each is dismayingly vulnerable to disruption from outbreaks of crudely self-interested behaviour more appropriate to lower levels (Donald Trump, Boris Johnson).
Much the same processes can be observed at work in business and the economy. In an evolutionary worldview, today’s emerging business ecosystems represent an important evolutionary advance, equivalent to the move from single-cell to multicellular organisms in nature, or a federation of city states to a nation. But while their potential is huge – McKinsey sees one-third of world business subsumed into a dozen or so multi-trillion dollar ecosystems (mobility, health, education, etc) in 20 years’ time – they are also finely balanced and prone to unintended consequences. Old habits die hard; many will fail. Surveillance capitalism and the Mafia remind us that there is no harmonious natural order from which positive outcomes will automatically emerge: ecosystems need managing, and managing at a different level from the one from which they are descended.
The contours of a management fit for the purpose of guiding a complex evolution-driven  ecosystem in which the health of the larger umit self-evidently is the thing that has to be maximised are only just becoming apparent – and they are dauntingly unlike those familiar to managers of today’s profit-maximising standalone corporation, simplistic by comparison. But the prize, says Wilson, is that if we know how to use it natural selection gives us a potent means of separating out the best means of reaching a chosen goal, and business, where between-group selection (or competition) is especially intense, is an ideal crucible (Wilson’s term) ‘for the cultural evolution of groups that work well in the present and adapt well in the face of environmental change’. In this way, the evolutionary worldview and ecosystems represent an unexpected opportunity to rectify some of the mistakes made at the previous level that have brought us to the edge of disaster, by consciously acting with the flow of evolution rather than against it. The stakes have never been higher.

 


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User comments

Henning Sieverts :: 30th Oct 19
Excellent, as usual. One more point: the companies that do evolve and adapt are more profitable for shareholders in the long run, if only because they will thrive.
Keith Risk :: 3rd Dec 19
Thank you, agree with Henning. For a'living' example, you might want to read 'Power to People, building an enabling culture' by Ghanshyam Pant. Rather like Ricardo Semler's book 'Maverick' but set in India. It's a great narrative of how a project to set up a new division of the company, Marico, was achieved. Putting people, and the management of people, first, last and everything.
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