The Organization in a Changing Environment

B usinesses and other organizations are complex adaptive systems, composed of elements that evolve both from the top down and from the bottom up.

B usinesses and other organizations are also components of larger complex adaptive systems—the societies and economies of which they are part.

The societies and economies of which businesses and other organizations are part are complex ecologies with Competition for limited resources, through exploitation and interference Predation and parasitism Cooperation and coalitions Evolution

Business and other organizations are of themselves ecological systems, whose subunits exhibit Competition Predation and parasitism Cooperation and coalitions Evolution

Challenges in managing ecosystems Expanding ecosystem services, while Maintaining adaptability and resiliency in changing environments and Minimizing run-off and other negative externalities. Note that natural ecosystems need not show any of these properties.

Organizational challenges Finding new opportunities for growth, while Maintaining adaptability and resiliency in changing environments and Minimizing undesirable societal costs (externalities).

How do we explain: Regularities at level of ecosystems and biosphere? Homeostasis?

Teleological Gaia … the Earth’s atmosphere is more than merely anomalous; it appears to be a contrivance specifically constituted for a set of purposes” Lovelock and Margulis, 1974 Kirchner, 1991

Problems with Gaia Gaia describes macroscopic regularities. Evolution operates at lower levels, and not for “benefit” of whole system.

Complex Adaptive Systems sustained diversity and individuality of components localized interactions among those components; and an autonomous process that selects from among those components, based on the results of local interactions, a subset for replication or enhancement.

E VOLUTION : Balance between homogenizing selection and generation of new variation C OMPLEX A DAPTIVE S YSTEMS : Self organization from existing variation (loss of diversity/dimensionality) Emergence of new variation (gain of diversity/dimensionality)

Classifying Complex Systems Top-down versus bottom-up Engineered versus self-organized Level(s) of selection

Complex systems Self-organization without global selection or design (River basins) Self-organization guided by global selection or design (Human development) Self-organization guided by local selection or design (Development of ecosystems, economies and societies) Where do organizations fit?

Adaptability and resilience in changing environments Organizations Anticipating and dealing with catastrophes and opportunities, endogenous and exogenous. Maintaining infrastructure. Ecosystems Anticipating and ameliorating catastrophes, such as pest outbreaks. Maintaining diversity and redundancy.

In Nature, there are a variety of evolutionary solutions (and challenges) Reversible mechanisms Physiology (Acclimation, homeostasis) Behavior (Torpor, movement, etc.) Irreversible mechanisms Development Evolution Are organizations so different?

Evolutionary portfolio management M ovement (dispersal and foraging), dormancy and reproductive scheduling all spread risks over lifetime, and allow exploration of new opportunities. M utation, sex and recombination spread risks for genome, and allow exploration of new opportunities. B iodiversity is key to ecosystem productivity and resiliency. But how is it maintained? S ocial norms reinforce accepted behaviors.

Organisms, genomes and ecosystems all face changing environments. Challenges Adaptability and resiliency in changing environments. Competition. Ecosystems and the biosphere are complex adaptive systems.

Evolutionary analysis Satisficing Optimization Frequency-dependence –Two-player games –Multiple-player repeated games Emergence and externalities Organizational and business analogies are strong.

Evolutionary analysis of the business world Satisficing — Typewriter Optimization — Genetic algorithms and the diesel engine Two-player games — Airline pricing in small markets Multiple-player repeated games — Airline frequent flyer programs Externalities — Problems of the Global Commons