Janine Rewell
Summary.
U.S. public companies are dying at faster and faster rates; in fact, they have a one in three chance of being delisted in the next five years. Why? They are failing to adapt to the growing complexity of their environments, the authors argue—misreading those environments, selecting the wrong approaches to strategy, or failing to support a viable approach with the right behaviors and capabilities.
Drawing on their research at the intersection of business strategy, biology, and complex systems, BCG’s Martin Reeves and Daichi Ueda, along with Princeton biologist Simon Levin, describe six principles that confer robustness in what’s known as complex adaptive systems—principles that are directly applicable to business. Firms should:
- maintain heterogeneity of people, ideas, and endeavors
- sustain a modular structure of loosely connected components
- preserve redundancy among components
- expect surprise, but reduce uncertainty
- create feedback loops and adaptive mechanisms to ensure the variation, selection, and propagation of innovations
- foster trust and reciprocity in their business ecosystems
Rising corporate mortality is an increasing threat, and the forces driving it are likely to remain strong for the foreseeable future. Understanding and implementing the principles that create robustness in complex adaptive systems can mean the difference between survival and extinction.
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Companies operate in an increasingly complex world: Business environments are more diverse, dynamic, and interconnected than ever—and far less predictable. Yet many firms still pursue classic approaches to strategy that were designed for more-stable times, emphasizing analysis and planning focused on maximizing short-term performance rather than long-term robustness. How are they faring?
A version of this article appeared in the January–February 2016 issue (pp.46–55) of Harvard Business Review.
