Evolutionary Thinking in Business

I am interested in evolutionary thinking in business. A key thing to bear in mind is that business evolution is a little different to biological evolution. Market competition is not the same as competition in nature, not least in its more rapid timeframes. So while some similar concepts exist in both, e.g., selection pressure changing populations over time, there is no reason why the evolutionary processes in business and nature should be the same.

A recent piece I wrote with Mark Vandenbosch (an Ivey colleague/interim Dean) and Ranjan Banerjee (Dean of the S P Jain Institute of Management and Research in Mumbai) sought to uncover “garbled strategic advice created by misinterpretations of evolutionary theory” (Vandenbosch, Bendle and Banerjee, 2019).

There is plenty of bad advice around as “… when used to illuminate business strategy, many evolutionary concepts are misapplied. If truth be told, marketplace competition doesn’t ensure that only the strongest survive any more than evolutionary pressures force anyone to be selfish.” (Vandenbosch, Bendle and Banerjee, 2019).

The three erroneous ideas we specifically critiqued are:

  1. Profit-maximization strategies inevitably lead to the best outcomes. They don’t because selection, even if this is based upon profits, is on outcomes not the intention of the strategy. Strategies not specifically aimed at profit maximization can often make more profit than those aimed at profit maximization given the right interactions in the market. Those making more money can care more about fairness, or be more competitive, i.e. want to win at all costs, than those aiming to maximize profits. Who does what depends upon the precise context.
  2. Business is survival of the fittest. This is incorrect as the ideal of fitness doesn’t exists. “You can’t assess whether a rabbit is fitter than a shark without knowing whether the creatures are on land or sea—which is why the popular misunderstanding of evolution, survival of the fittest, is conceptually wrong.” (Vandenbosch, Bendle and Banerjee, 2019). You can only be fit in a specific context (and these contexts constantly change). At best it can be ‘survival of the best fitted’ to the current environment.
  3. Specialization makes you stronger. Often specialization makes you weaker in the sense of being more vulnerable to changes in your environment. Having a bit of redundant capacity can be good if it allows you to react positively to changes.

Evolutionary ideas can be useful, and don’t need to mimic biological findings, but be careful. Many of the most common evolutionary ideas used in business don’t make a lot of sense.

Read: Mark Vandenbosch, Neil Bendle and Ranjan Banerjee (2019) Survival of the Best Fitted, Ivey Business Journal, March/April, https://iveybusinessjournal.com/survival-of-the-best-fitted/