(R)Evolution: Organizations and the Dynamics of the Environment

537 Pages·2005·21.227 MB·English

by  Rob Dekkers (auth.)

(R)EVOLUTION
(R)EVOLUTION
ORGANIZATIONS AND THE DYNAMICS
OF THE ENVIRONMENT
ROB DEKKERS
DELFT UNIVERSITY OF TECHNOLOGY
DELFT, THE NETHERLANDS
Springer
Library of Congress Cataloging-in-Publication Data
A CLP. Catalogue record for this book is available
from the Library of Congress.
ISBN-10: 0-387-26125-7 e-ISBN-10: 0-387-26159-1
ISBN-13: 978-0387-26125-6 e-ISBN-13: 978-0387-26159-1
Printed on acid-free paper.
© 2005 Springer Science+Business Media, Inc.
All rights reserved. This work may not be translated or copied in whole or in part without
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Printed in the United States of America.
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SUMMARY
Adaptation as a process requires the generation of variation by companies, and
the subsequent selection of mutations by the environment when drawing an
analogy with evolutionary biology. The research aims at revealing both processes
and structures that contribute to the generation of variation by companies, and
that make it possible to anticipate on the selectional forces of competition and
the product-market combinations. Companies differ from organisms to the extent
that they can create a larger impact on the environment, they have the capability
of foresight, and they possess relatively open boundaries. Additionally, mutations
are induced and implemented in the organisation rather than creating offspring,
the mechanism for organisms to adapt. To provide a structure for adaptation, not
equalling one-time interventions but continuous change, the research has proposed
a Framework for Dynamic Adaptation, encompassing:
• the Model for the Dynamic Adaptation Capability, containing both the
externally oriented Dynamic Capability and the Internal Innovation
Capability. Although both thrive on the interaction with the environment,
the main purpose of the Dynamic Capability is to deal with environmental
change and the impact of internally induced variation on the environment.
The Internal Innovation Capability describes mostly the generation of
variation;
• the Innovation Impact Point Model, which describes the impact of innovations
on decision-making within companies. This model has been included in the
Model for the Dynamic Adaptation Capability;
• the Collaboration Model. This model shows the interaction between
companies for horizontal and vertical integration.
INTERACTION WITH THE ENVIRONMENT
Companies do depend on the actions of other companies in their industrial
branches as well as the preferences by the customer base. Outcomes of these
competitive pressures entail always chance. Nevertheless, the capability of
foresight and monitoring of the environment, assist industrial companies to
anticipate. The interaction with suppliers generates further possibilities to adapt
to changes in the competitive pressures and changes in the product-market
combinations.
The capability of foresight calls for a more dynamic approach than the static
strategy schools at the moment present in management science. Thereto, the
research has proposed a model for dynamic strategy, and, separately, a scenario
VI
planning based on game theories. The model of the dynamic strategy tells simply
that companies should not focus on a singular strategy with a predetermined
outcome; realising that strategy becomes virtually impossible because of chance
events happening in the course of time, and maintaining that singular strategy
carries the danger of pursuing it at all cost. In addition, a scenario planning
based on game theory will help companies to anticipate better on the future;
current scenario methodologies lack a coherent background or fall back to
predicting one single future. Although the research has not developed yet this
scenario planning. Adaptive Dynamics, a recent development within evolutionary
biology, has been identified as theoretical base.
The second method to deal with competitive pressures is the monitoring of
the environment, for the emergence of dominant designs and for decision-making
on concepts of innovation. Eras of ferment results in periods of selection whereby
preceding the emergence of a dominant design, elements of this design become
visible. Monitoring the environment by industrial companies will result in early
detection of these elements, and the possibility to integrate them into a product
architecture that fits with the emerging dominant design. That monitoring connects
to the internal processes and structures of dealing with innovation and
breakthrough processes for which the Innovation Impact Point Model has been
developed. In this model, innovations are assessed on their merits to contribute
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Model for the Innovation Impact Point. The breakthrough model shows the learning modes and
the identified Innovation Impact Points (IIP). The higher the Impact Point, the more changes and
innovations from lower levels affect organisational decision-making. Architectural, and often
radical, changes and innovations come about through accumulation of minor changes and
innovations.
Skills, knowledge
Resources
Resources
Skills, knowledge
Collaboration Model. Exchange relationships occur through vertical and horizontal integration.
Vertical collaboration indicates the capability of actors to manage the supply chain. Horizontal
collaboration contributes to the dynamic capabiltiy of the network by reallocating resources or
creating substitution.
to the concepts of innovation: incremental, modular, architectural, and radical
innovation.
Thirdly, the research proposes a model to enhance collaboration with
suppliers, the Collaboration Model. This model embeds both the steady-state
process of managing the supply chain and the breakthrough processes; labeled
as horizontal and vertical substitution. Additionally, it breaks ground to combine
process models with actor models. The model as such has not fully been developed
to include control, etc., but it does link to the capability of foresight and monitoring
of the environment. Technology leverage by suppliers is seen as essential to
sustain competitiveness at the long run, hence the effects might be captured by
using the Innovation Impact Point Model and the Model for the Dynamic
Adaptation Capability. The principle of self-organisation derived from
evolutionary biology finds its place here but has not yet been converted to practical
approaches.
Hence, the organisation responds to the environment by constantly putting
variations to the test of selectional forces. By intended mutations, organisations
shape their own future, an active rather than a passive role. The interaction with
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the environment requires a shift in management paradigm from the supposed
effectiveness of one-time interventions (i.e. linear thinking) to managing the
opportunities from the interaction with the environment (emergent thinking),
supported by the generation of mutations (markets, products, performance).
GENERATION OF VARIATION
For the generation of variation, in processes and structures, industrial companies
might revert to the theories of technology management, innovation, process
innovation. Business Process Re-engineering, Learning Organisation, and
Knowledge Management. The review of these theories on their merits for the
development of organisations showed that some of these concepts have
similarities resulting in the proposition of the Innovation Impact Point Model.
Especially, the conscious deployment of possibilities for architectural innovation
within this model might increase the competitiveness of firms.
Yet, the biological concepts of adaptive walks and developmental pathways
have received little attention in management science. The dominant model of
the punctuated equilibrium serves as retrospective explanation of phenomena, it
does not possess predictive characteristics to indicate periods of turmoil and
consolidation for industry. Rather, the accumulation of gradual changes might,
in terms of the Innovation Impact Point Model, evoke the assessment of internal
developments at higher Impact Points. If an accumulation occurs that fits with
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Model for the Dynamic Adaptation Capability. Expanding on the model of the Innovation Impact
Points, this particular model distinguishes the Internal Innovation Capability and the Dynamic
Capability with its external orientation.
adaptive zones (emerging product-market combinations or shifts in existing
markets), then the mutation rate might temporarily accelerate, thereby giving
the impression of a period of turmoil. At the base of beneficial mutations,
speciation and bifurcation, always lies mutations inclusive deleterious ones and
the existence of adaptive zones.
However, the study into the development of the Dutch economy during the
Golden Age and the end of the 20^^ century indicates the relative slow change of
an economy's capabilities (indicating that organisations might change slower
than we want). Accumulation of changes, sometimes resulting in macromutations,
compares to the mechanisms of micromutations and the phyletic gradualism.
Macromutations come about from organisations themselves and might change
the environment, calling for impact analysis through foresight (based on game
theoretical principles).
The research has confirmed that industrial companies seem to move at the
principles of gradualism, gradual change more than radical change. Revolutionary
change hardly beholds, it draws heavily on the resources of companies. Other
management scientists have proven that companies might be better off not
implementing radical change or that companies slowly turn back to the old ways
of working and old structures. Six case studies showed that topics for structural
change, the domain of the methodology of the Delft School Approach, concern
increasing local fitness, i.e. optimisaton, rather than considering evolvability,
therewith confirming of the principles of gradual change. Therefore, the concepts
of the Innovation Impact Point Model and the related Model for the Dynamic
Adaptation Capability provide processes and structures for companies dealing
with such. Models based on evolutionary biology seem to have validity for the
domain of organisations, particularly their development.
RESEARCH METHODOLOGY AND OUTCOMES
The quest into the adaptation by companies has taken this research along
evolutionary biological models to look for models for adaptation and to convert
them to the domain of organisations. The exploration of the evolutionary models
resulted in the development of a new reference model and the formulation of
hypotheses. The reference model denotes organisations as allopietic systems
with fuzzy boundaries and the capability of foresight; the development is based
on five issues: (a) the distinction between genotype and phenotype, (b) the
undertaking of adaptive walks, (c) the existence of developmental pathways, (d)
the criteria sustained fitness and evolvability, and (e) the principle of self-
organisation. This basic model generates additional insight in current theories
for organisational development and organisational ecology. The reference model
has served throughout the investigation as both predictive model for generating
an integral approach to adaptation, and as explanatory model for reviewing
existing theories in management science. The reference model assisted in
expanding the hypotheses of the research in more defined ones for testing in the
six case studies and the review of approaches in management science (technology
management, innovation, process innovation. Business Process Re-engineering,
Learning Organisation, and Knowledge Management). The belonging
evolutionary mechanisms define the developments that companies experience,
except for the principle of self-organisation. It seems that the principle of self-
organisation has great impact on the development of industrial companies, it
requires more research to expand it in workable models. The review of main
hypotheses leads to the conclusion that continuous change prevails above one-
time interventions as effective approach, and that environmental interactions at
the contemporary boundary of an organisation drive evolution (companies have
the capability to shift boundaries in contrast to organisms).
Since the research also questioned the validity of the so-called Delft School
Approach, its methodology has been briefly reviewed. The methodology accounts
for strategic intents, sometimes in contrast to other approaches of process
innovation and Business Process Re-engineering. The implementation of its
solutions requires the development of additional theories for adaptive walks and
Ecology
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Environment
Foresight
Demography
Function
trajectories
/ Selection
Form
Fitness
trajectories
Memes
Replicators
Non-genetic Mutation
Evolutionary mechanisms for organisations as reference model. Memes and replicators serves as
input for genetic formation, which exists besides non-genetic formation. Developmental pathways
determine the form and function trajectories. These pathways also relate to organisations being a
class of allopietic systems. The selectional processes select beneficial phenotypes on fitness
following adaptive walks based on the criteria of sustained fitness and evolvability. Organisations
have the capability of foresights in contrast to organisms.
XI
developmental pathways to increase the effectiveness of its deployment. The
research also proposes to adapt the theoretical model for a process (from Systems
Theory), and to adapt the breakthrough model to suit the more dynamic views.
The research, the examination of biological literature, the review of existing
management literature, the case studies has yielded models that did not exist
before:
• the reference model derived from evolutionary biology to the domain of
organisations, the view on organisations as allopietic systems with fuzzy
boundaries;
• the Framework for Dynamic Adaptation, consisting of the Model for the
Dynamic Adaptation Capability along with the Innovation Impact Point
Model, the Collaboration Model, a proposal for dynamic strategies, and a
proposal for scenario planning based on game theories;
and some additional proposals for:
• the assessment of factual innovations against the concepts of innovation and
their impact;
• the implications of architectural innovation;
• the modelling of the Learning Organisation;
• the modelling of Knowledge Management.
The research has not ended. It should continue with expanding the models of the
Framework for Dynamic Adaptation, developmental pathways, adaptive walks.
Furthermore, the research base should be extended to include change
management, culture, and leadership. Finally, the number of case studies has to
be increased. This will open the possibility to conduct a study like the one of the
aviation industry to more detailed mechanisms and models of adaptation.
PRACTICAL IMPLICATIONS
The principle of homeostasis, implicitly present in most theories of management
science and therewith aiming towards describing a steady-state, views the
environment as certain. The driving principles of evolution have shown that
continuous interaction between the generation of mutations and the selection
process in the environment enables the development of organisations. Especially,
the mathematical models of Adaptive Dynamics demonstrate this interaction to
the extent that organisms (and therefore also organisations) might influence their
environment as a continuous process. Hardly, any equilibrium exists. Through
successive minor modifications, potential major shifts are being prepared, creating
potential opportunities for sustained fitness, optimisation within the current
product-market combination, and evolvability, aiming at bifurcation and dispersal
for emerging opportunities. The changes take place because of the continuous
interaction between the generation of variation and the selectional processes.