How they can help you succeed in adversity…and how they can steer you wrong.
Any one of us—and any one of our organizations—could be forgiven for behaving at the moment like a bear confronting winter. I don’t mean behaving “bearishly,” as investors do. No, I mean behaving literally like a bear—which is to say, shutting down the system. Hibernating. Certainly feels like the wise course just now. And haven’t we learned that nature is a sage guide to strategy?
Yes, but. First: History shows that the great winners in downturns are not those businesses that shrink production capacity, downsize the labor force and conserve cash until the economy picks up again. The winners are the ones that try to expand sales—the ones that grow. Second: Well, the bear isn’t the only creature in nature. Nature suggests many adaptive responses to a harsh or changing environment.
Not that the bear’s response to economic winter is all wrong. Hibernation can be an effective strategy, if certain assumptions hold. (Length of winter; adequate fat; return of normal world in spring.) Unfortunately, it’s already becoming clear that—this time—those assumptions are unlikely to hold up.
THE DOWNTURN MANIFESTO
A manager’s guide to surviving—and thriving—in recessionary times
And while the first order of business in a downturn of this magnitude must certainly be to ensure survival, leaders must also ask themselves how they will gain advantage coming out of the downturn. Beyond the largely metabolic strategy pursued by the bear, nature offers four broad alternatives:
Behavioral strategies Just as animals variously change their diet or hunting habits when critical foodstuffs run short, businesses might adjust the customer offering, explore new pricing models, enter new markets or exit others.
Social strategies Animals find advantage by banding together through cooperative or symbiotic relationships; businesses might partner with suppliers, customers or competitors.
Reproductive strategies In nature, two reproductive strategies confer advantage: focusing on survival through quantity or quality of offspring. In business, reproductive strategies typically entail carefully managing the portfolio of “business experiments.”
Evolutionary strategies Sometimes the environment is so hostile that the only way to adapt successfully is actually to evolve to another form—in business terms, innovation of business models.
Evolutionary strategies are particularly interesting because for companies to evolve successfully they need to manage populations of business model experiments that have some deliberate degree of redundancy. Put another way, companies need to foster and tolerate the latent value of traits that may seem extraneous today but that may offer the possibility of serendipitous fit with unpredictable shifts in the environment—a process known in biology as “preadaptation.”
For this reason, recessionary cost reduction and efficiency initiatives cannot be simple maximization exercises lest they trim critical preadaptive business models or capabilities. Cost reduction needs to reflect subtle trade-offs between short-term survival and long-term advantage. It’s critical to distinguish carefully between what’s strategic and what’s superfluous. Clearly, without survival there is no possibility of advantage. But without diversity, experimentation and even some degree of redundancy, there can be no resilience in the face of change.
Martin Reeves is a senior partner of the Boston Consulting Group and director of the BCG Strategy Institute.