Against the backdrop of fast changing, complex and less predictable technological landscape, organizations are perishing younger than before. In a recent HBR article , Martin Reeves and others report a study of more than 30,000 public firms in the US over a 50-year span. And they found that average age at which companies got delisted reduced from approx. 55 years in early 1970s to 31.6 years in 2010. Their diagnosis: Companies are dying younger because they are failing to adapt to the growing complexity of the environment.
“Adapt” is the key word here, but what does it mean for an organization?
Companies that adapt well cultivate what is known as “adaptive culture,” which encourages anticipating and sensing change, openness to new ideas, experimentation, speed and risk.
The key behaviors of adaptive culture fall under five categories:
Collaboration has always been a desirable cultural attribute but in today’s fast paced environment, its scope and meaning is changing rapidly. Adaptive culture demands collaboration within constantly reconfiguring teams that are often distributed across the world. It also means working constructively with multiple stakeholders outside the organization, such as institutions or universities, industry and technology forums, besides customers and vendors.
Google, for instance, organizes itself into flexible, diverse, and modular units of employees that can be reconfigured quickly depending on fast changing needs of its customers or new technological shifts. This kind of collaboration dynamic points to the emerging contours of adaptive work culture.
Openness and trust
Adaptation always involves embracing something new, often with a leap of faith. Adaptive culture emphasizes the value of openness: ability to freely express and participate in decision-making. This behavior ensures that all news--good and bad--and diverse views are on the table for the decision-makers to evaluate any important issue from different angles.
This strand of adaptive culture took a backseat in Nokia when the company kept pushing its managers to sell its legacy products while the market was rapidly shifting to more sophisticated software-driven and sleeker smart phones. INSEAD professor, Quy Huy, based on an in-depth investigation  and interviews with top and middle managers, engineers and external experts, points out that a culture of fear (lack of openness and trust) discouraged the middle managers from telling the truth. The managers couldn’t tell openly that their product was inferior, keeping the whole organization in a denial mode. At the same time these managers also accepted unrealistic deadline to develop new software to compete with iPhone and Android when the panic button was finally pushed, resulting in a sub-standard product release. The company eventually went downhill while failing to adapt fast and was sold to Microsoft in 2013.
Experimentation & risk taking
Experimentation is about creating and developing alternatives, and risk-taking is putting resources and commitment behind the chosen ideas, but being prepared to accept failures.
Amazon, a company that takes experimentation and risk taking seriously for its own survival, is known for bizarre moves like opening a brick and mortar store as Omni-channel retailing gains new legitimacy. This is a clever experiment and Amazon would be well prepared to change should the retailing world actually go that way.
In another instance, Flipkart, India’s largest e-commerce company shut its payment gateway “PayZippy” within a year of its launch after it failed to garner enough consumers. It was an attempt to embrace the larger trend of mobile payment gateways. However, still not to be left behind, it then simultaneously made investment in start-up “ngpay”, another mobile based payment service and marketplace. This is the spirit of experimentation.
As businesses grow, decision-making tends to slow down as each decision gets debated by large number of people. Adaptability, on the contrary, is about quick adjustments and speedy decisions.
Kristen Gil, VP of Business Operations at Google observes: “The challenges Google faces aren’t unique; in a permanently accelerating environment, we are all seeking best ways to move faster and smarter.” Larry Page endorses: “There are no companies that make slow good decisions.”
Since decisions can impact a process or a product or even a business model, lack of speed can literally cost the company its business.
At the heart of it, adaptation means embracing change, which is never easy, but always messy.
Charles O’Reilly, an expert in organizational culture at Stanford notes that adaptive cultures are characterized by a bit of mess: conflict, speed and constant experimentation.
I remember when airlines in India moved their business model about a decade back, from full service to western style low-cost, airline caterers like my company had to adapt in a matter of weeks to survive. Our culture, which was largely shaped by predictable demand of full-service, now needed dynamic response. We needed new collaborative behavior across functions, new skills (e.g., Analytics) and greater intensity; many employees were just overwhelmed. It was not a neat way forward. Efficiency and customer service had to be redefined. It was messy because new behaviors were not fully consistent with the old ones.
We are still learning about adaptive cultures but broad ideas are in place. Organizations that are able to elevate their present culture to include attributes of an adaptive culture are likely to not only weather any storms but also enjoy leadership over extended periods.