Deep beneath the crystal-clear waters of the Pacific Ocean, there are vibrant coral reefs teeming with life. The coral, in shades of pink, orange, and green, spreads out like a colorful carpet across the seabed, creating a spectacular underwater landscape.
Schools of tropical fish dart in and out, their bright scales shimmering in the sunlight that filters through the water. Parrotfish nibble on the algae that grows on the coral, while clownfish swim through anemones that cling to the reef. As the day turns to dusk, the coral reef comes alive with even more activity. Crustaceans scuttle along the sea floor, while tiny shrimp and crabs crawl in and out of the crevices in the coral.
A healthy coral reef, like a healthy business, supports an ecosystem of life. Myriad species rely on the reef and support of each other to survive. When a reef is unhealthy, typically due to increasing water temperatures, the symbiotic relationship between the coral and algae that live on it breaks down, causing the coral to lose its color and eventually die. It can no longer provide a habitat for the diverse array of marine life that depends on it, and the entire ecosystem can collapse.
What can the ecosystem of the coral reef teach us about the health of a company, or a society?
A strong and vibrant entrepreneurial economy is like a healthy coral reef, supporting a community of people, ideas, and businesses that may both compete with and assist one another.
Last week I spoke for a Ukrainian university, MIM-Kyiv Business School, as part of an event to support and strengthen the Ukrainian economy after victory. As I listened to the different business owners sharing their stories, I was awed that their businesses ranged so drastically—startups aimed at global expansion; family businesses that do incredibly well but have no plans to scale; brand new ideas and tales of rebirth. It reminded me how much, both inside and outside of companies, success comes from diverse ecosystems, working and evolving together.
Applying an evolutionary perspective to ecosystems in business
April 19 marked the anniversary of Charles Darwin’s passing in 1882. The British naturalist and biologist wouldn’t have used the term “ecosystem” as it was not coined until 1935 by ecologist Arthur Tansley, but Darwin did contribute to the understanding of species and the importance of the environment for their survival. He clarifies a set of principles that help us build our organizations into healthy, thriving ecosystems and avoid the uninspiring blandness of a sick ecosystem.
Three of Darwin’s key ideas are particularly relevant here:
- Variation: Every healthy species needs to create variations (changes in eye color, height, etc.). Yet so many companies resist variations in the business models (pricing models, operating processes, organizational structures).
- Offspring compete: When an offspring has a trait that makes it better, that offspring wins the right to propagate, and the superior trait continues. Yet many companies seek to avoid internal competition. The idea of two teams working on alternative approaches to solve the same problem is considered redundant. And ideas that are already being implemented rarely must compete with new ideas.
- The fittest survive: For the ecosystem to be fit, those competitions between variations need to favor the fittest. Yet in many companies the best ideas do not always win. Instead, those with tenure or senior support hold an unfair advantage over newer, seemingly “crazier,” ideas.
Amp up variation
A healthy funnel and flow of ideas (your “offspring” in this case) is critical to your success as an innovator. Not all of your or your employees’ ideas will turn out to be good ones—that’s ok; a 15% success rate on innovation is generally considered good. This means that you need to diversify your portfolio of ideas … to create more variation.
If you’re an employee, look to eight dimensions of your company’s business model, which we at Outthinker refer to as the 8Ps, as a starting point: How might you change the positioning, product, pricing, placement, promotion, physical experience, processes, or people systems in your company?
If you’re a manager, instead of asking employees to prove their idea before running with it, find a way to test ideas quickly for low investment. Michael Schrage recommends the 5x5x5 experiment. Give five people $5,000 and five days to test their idea. If an idea doesn’t seem promising, kill it off (or save it on the list for later) and collect the lessons learned.
Let offspring compete
In today’s volatile, uncertain, complex, and ambiguous world, it is detrimental for a company to preserve internal silos that isolate the blending of, and the competition between, teams and ideas. Companies like Haier are evolving to create micro teams (Haier calls them microenterprises) that can form, fluctuate, and reorganize around ideas.
Outthinker research revealed companies that organize in small teams experience increased intrapreneurial intensity (the offspring/ideas mentioned in the previous section) and improved financial performance. Outside of companies, industries are dissolving and rearranging around customer needs, rather than supply chains and knowledge bases as they have historically done.
Whether you are an employee or a company leader, observe the boundaries that exist inside and outside of your organization. Are they helping to solve a customer need? Or are they preserving bureaucracy and prolonging problems? Where might you cross traditional organizational boundaries to come up with an innovative solution?
Let the fittest survive
Both in nature and in business, an organism cannot survive if it refuses to adapt. Adapting demands that when new ideas and approaches emerge that are superior to the legacy ones, they win. This may involve changes in strategy, product offerings, or business models to stay relevant in a rapidly changing market.
Intrapreneurial companies are promoting healthy competition within. In one of our most fascinating findings, we show that when companies create competition between shared services (HR, finance, marketing, etc.) by offering employees their choice of shared services (if you are not happy with the support you are getting, you can switch), they significantly improve performance. The concept of “survival of the fittest” applies across ecosystems, with the most successful companies being those that adapt quickly and outcompete their rivals.
The healthy coral reef is a wonder of the natural world—a thriving ecosystem that is home to countless species of marine life. A healthy company can mimic the same qualities. It supports a thriving community of intrapreneurs with a constant funnel of new ideas and it is part of an external network of stakeholders and partners who complement and support the organization and form a whole greater than the sum of its parts.
Darwin’s theory of evolution offers guidance into the principles that describe the success of an ecosystem in both nature and business:
- More variation (ideas) must be born.
- Those ideas (or offspring) must be able to compete with each other.
- The fittest should survive for the company to be able to adapt to change.