Venture capital has dried up. Business pages report on getting back to basics. It has even become fashionable to snicker about the foolish mass hallucination of the New Economy. Anyone with a new idea in a corporation is being told “cost cutting is our focus right now.” Corporate management has battened down the hatches.
Meanwhile, a few contrarian voices say that it’s a great time to start companies because talent is available, entrepreneurs’ valuation expectations have plummeted, and office space is cheap. And for existing companies, they say, it is not time to downsize but time to use freed-up talent to innovate in preparation for the next economic cycle.
So which is the right corporate survival strategy — contraction or exploration?
Nature offers some models for survival under stress. For instance, if a human being is plunged into icy water, the digestive system immediately shuts down, the heartbeat slows, and oxygen consumption is minimized. The organism tries to preserve its core functions and eliminate non-essential ones until its next breath can be taken. That’s a pretty good description of how many companies are reacting to the stresses of the current economy: contracting resources to those essential for existing core strategies and operations.
A different reaction to change can be observed in the complex adaptive systems that species have evolved to survive in fluctuating environments. In an ant colony,... To read the complete article, login or sign-up using the form below.
Become a premium subscriber today to read this and all MIT Sloan Managmeent Review articles.
Buy this article. Purchase one or more copies of this article in PDF form.
Become a premium subscriber today to read this article and the entire archive of MIT SMR articles.
Upgrade your existing subscription to premium
Sign in if you are a premium subscriber.
Do you subscribe the MIT Sloan Management Review in print? Enter the email address and password you used when ordering. Don't remember? Lookup your subscription account information
- Register for free access to recent articles and the current issue of MIT Sloan Management Review.
- Subscribe and read articles from the past three years online.
- Premium subscription give you access to the entire archive of articles.
