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Strategy And Evolutionary Thinking

I have written a number of posts and articles on evolutionary strategy see here, here, here, and here. A full article that is free to read is in the Ivey Business Journal, see here. In my marketing strategy advice I bring together some concepts and how we might want to think about strategy and evolutionary thinking.

Biology And Business

It is important to understand that there need not be a simple mapping from biological ideas to business. That there isn’t a perfect link to biology isn’t a problem. Business people don’t need to be experts in biology because evolution will impact markets and marketing differently than it impacts biolgical systems.

Consider how evolutionary thinking might impact strategy in two ways.

Firstly, evolution has impacted humans, their biology and psychology. For example, how has our thinking been impacted by the evolution of humans? When thinking about this clearly your biological thinking shouldn’t be wrong. Still, you don’t need a detailed knowledge of cell biology, for example, to discuss how humans think and how this relates to marketing strategy.

Secondly, the approach this piece takes comes from a different angle. I am using evolutionary metaphors for how markets change. To this end there are a number of concepts that are worth thinking about. When using evolutionary concepts these are used as a source of ideas, rather than providing a clear theory related to biology. To think of this note that over the years there have been a number of evolutionary theories which weren’t correct biologically speaking. (Darwin wasn’t the only person thinking about evolution in the nineteenth century). Even if ideas were wrong in biological terms they can still provide useful metaphors. Firms don’t mutate in the same way that biological organisms do but that doesn’t stop us being able to think of how markets might change under selection pressure.

Frequency Dependence

Frequency dependence is a concept that captures the idea that the best strategy depends upon what the rest of the population is doing. This is important as if frequency dependence applies it undermines any argument that there is, or can be, a universally correct strategy. If the best strategy depends upon what everyone else is doing then your best strategy will change as the population changes.

In business this means you are going to need a lot of information about the market to know what others are doing before you can be sure you are doing the right thing. If you want a simple illustration think of how you might adopt a restaurant strategy in a small town. You might think a pizza place would work well in a small town but if there is already a pizza place there you might want to pick some other format for your restaurant. For more on frequency dependence see here.

Profit-Maximization And Maximizing Profits

A challenge with a lot of work in the area of strategy and evolutionary thinking is that it is often based upon economic ideas, see Armen Alchian and Milton Friedman amongst others. A lot of this work doesn’t really focus too much on the thought processes of those involved in markets. Some seem to assume that attempting to adopt a profit maximizing strategy can be equated with maximizing profits.

Yet we all know that managers do not know what decisions they need to take to maximize profits. They might, or might not, try to maximize profits but trying is nothing like the same as achieving it. If you model outcomes assuming that aiming for profit-maximization is the same as maximizing profits then your model is simply deeply flawed if you are thinking about business strategy. You basically are assuming away all the problems of management in your model. The research I did with Mark Vandenbosch, here, talks about how we can link decision making and evolutionary modeling. I’d love to see more work in this area.

Survival Of The Fittest Doesn’t Make Sense

Many people think of evolution as survival of the fittest. The problem is that this doesn’t really make sense. The challenge with survival of the fittest is that it implies some sort of objective fitness.

Yet an objective idea of fitness does not exist. As such, there is nothing you can maximize against. Fitness depends upon what you are trying to do so there can’t be a single fitness. We must change the terminology.

I admit it remains a bit simple but I think the idea of survival of the best fitted at least makes some progress. Basically, you need to understand what you are trying to do in order to judge whether the strategy you are adopting is likely to be successful at doing it. Best fitted implies that what you are ‘fitting to’ matters.

Redundancy And Specialization

Specialization can make you stronger but it can also make you more vulnerable to changes in your environment. Having a bit of redundant capacity can be good if it allows you to react positively to change. This is an important idea. I think it is a real challenge to think of how we can measure the benefits of redundancy.

Garbled Thinking

A lot of ideas about strategy and evolutionary thinking need to be better. In essence, there is a lot of garbled thinking about evolutionary concepts. Examples below come from our Ivey Business Journal article.

Garbled Ideas About Strategy And Evolutionary Thinking

I would love to see marketers thinking more about markets. How do the ideas we worry about in respect of consumers matter to how marketers should approach their markets?

For more on marketing strategy see my various pages on the topic

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