Feature
“It is not necessary to change,” said W. Edwards Deming, the father of Quality Management; “survival is not mandatory.” However, if a firm can adapt to a changing environment, it will survive; and if it can adapt more quickly than its competitors, it will lead.
W hen we—individuals or organizations—confront a sudden disruption, our first reaction is usually to fall back on familiar. It’s called the adaptability paradox. Precisely when we need to lean into change and come up with something new, we fall back on the familiar. If you count Neanderthals, we’ve been at this evolution, adaptation thing for more than a few thousand years, and over those centuries, we’ve been pretty successful. But we’ve kinda been dragged into it. Yes, we’ve come a long way from the prehistoric cave, but our brains haven’t. Our primitive brain—the amygdala and the limbic system—is unthinkingly reactive. The prefrontal cortex is where we reason and learn; but not only is our primitive brain faster than our thinking brain, it uses less energy. MRI scans tell us that when the amygdala is in action, only a small part of the brain is working, about the size of an apricot. When we’re reasoning or learning, it’s the prefrontal cortex. About half the brain is operating. Thinking is a whole lot more work than reacting, and altering habitual behavior is the brain’s equivalent of hard labor. The brain can be re-wired, but it takes some effort. The first time you drive to work, you have to
actively think about where you’re going. The hundredth time you do it, you’re on auto pilot. To get out of a pattern of behavior and response, to adapt, you’ve got to create a new pattern. In other words, train and prepare. In the last few years we’ve seen a global pandemic, a tangled mess of supply chains, a whiplash- inducing labor market, not to mention natural disasters, a generative AI explosion, inflation cycles and geopolitical instability, all of which reshuffle markets overnight. When markets and conditions change, firms must re-evaluate their strategic positions and adapt their business model to keep pace. Adaptability and its partner, resilience, are no longer “nice to have.” They’re drivers of performance. And mandatory. A recent McKinsey report says that companies ranked in the top 25 percent for organizational adaptability were 2.4 times more likely to outperform their peers financially across a ten-year horizon. Ten years, that’s money. That’s growth and shareholder value. Even Wall Street has started to price this stuff into evaluations. Corporate ratings now include indicators of resilience and adaptability—scenario planning,
Harbert Magazine 35
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