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The Adaptive Organisation Summary for Final Exam
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Session 1 | Foundations of Adaptation | Necessity of Adaptation(Morgan, 2006) The Evolutionary Theory of Organization
Evolutionary theory of organization: Organizations change - adapt - over time to meet the requirements of their environment.
- Example of organization change → In 1997, Netflix distributed DvDs. In 2007, Netflix introduced
streaming. Today, Netflix is a production studio (and streaming service).
- Adaptation – something tangible. Clear change in your strategy.
- Environment of an organization is the market. You have competitors, consumers in your environment. H&M, Zara adapting
to the environment/trends.
- Regulatory environment is also an environment. In each environment there are different requirements, organizations
change and adapt to these environments.
What value does evolutionary theory add? Why evolutionary theory?
● Focus: Value added to evolutionary theory.
Old Perspective: Mechanic / Closed system
● Organizations decided when they would change – that’s what a closed system means. Organization decides what they
would do. Everything coming from within the organization. That means that Netflix changes occurred because Netflix
decided that they would occur. What does this mean for firm performance? First, it places a lot of emphasis on resources,
especially human capital. Second, chance – or luck – plays a relatively minor role in determining performance.
Life cycle: Four basic stages
- Data does not support this perspective
- No organization voluntarily chooses to decline...or organizations that make it to maturity do not voluntarily decide to
decline. There is usually an environmental effect. The fact that decline happening makes adaptation necessity. You have to
change to get out of decline.
New Perspective: Organic / Open System
Organization as open systems
Open organization → Organizations are sensitive to pressure of change that comes from outside
the organization. Morgan says: You cannot see organization as close system, it has to be open. Open
emphasizes permeable boundaries. You have input and output. Things come in and out. Holistic: the system
matters as a whole. Whole can be more than the sum of parts because of synergies between inputs. By
being connected you have flexibility. Your output can add more value. It’s important to be flexible.
Your actual system matters (organizational change is important). Permeable boundaries: who do you hire &
who do you allow to leave. (different subsystems will not be on the exam)
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, The more turbulent the environment, the more ‘adhocratic’ or ‘organic’ the organization should
be (Burns and Stalker, 1961; Morgan, 2006). So: when the environment changes, the organization changes…
it adapts. The more consumer change, industry requirements, tech change → the more organic organization
should be.
That is the value of evolutionary theory of organization. Because it identifies where the pressure of change comes from
and it helps to explain why some organization gets it right and some wrong.
The Trend
Increasing competitive pressure in nearly all industries
● Industry life-cycles have become compressed
● Growth patterns may differ each time
● Boundaries between industries are less pronounced
● Technological change forces firms towards innovation
Increasing competitive pressure means market leadership is more volatile* (Fortune Global 500)
- Correlation between market share and profitability has decreased
Result: Increasing dynamism in nearly all industries.
Adapt and succeed?
- Not every organization can adapt
- Why do organizations fail to adapt? Inertia. Path dependence. Unwilling. Unable
- E.g. Rodeo (not all organization can adapt, some fall),
- Not every adaptation is successful
- Why do adaptations fail? Change, in and of itself, is not enough
- Example: Microsoft Zune (adaptation to technology) for Apple’s successful iPod
- Contingency Theory: The match between the adaptation and the situation influences performance. Not every company
can adapt, you have to match the situation as well.
Failed adaptation: Polaroid (they couldn’t adapt properly to the market)
- Heavily invested in digital imaging in the 80s
- Polaroid lacked the ability to refine their conceptions of how to market their products. They failed to adapt.
- They held on to a razor/blade business model: cheap hardware/expensive extra’s (e.g. camera/film; field printing)
- As a result, they ‘missed the boat’ in the digital imaging market which fostered expensive hardware, and one-off purchases
(Tripsas and Gavetti, 2000).
● Polaroid missed the boat. It’s imperative to always be prepared for change, and not to assume you know what’s what.
Overall Model
(Abatecola, 2014) Organizations and their environment
● From evolution to co-evolution
● Environmental fitness
In part I we covered: Organizational adaptation = response to environmental demands. Rises from environmental demand.
Two perspectives on change (Abatecola, 2014)
● Determinism: Inactive/reactive organizational adaptation. Organizational adaptation is the organization reaction or
inaction to environmental forces or demands. Environment tells you everything to do, and determines what you’re going to
do.
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, ● Voluntarism (strategic choice): Proactive/strategic organizational response. Organization adaptation is proactive
organizational responses to environmental forces or demands. Opposite of determinism. Organization determines.
The evolutionary process
(comes up in all papers)
- Variation: organizations adapt in many different ways to their environment. As the environment changes, variation comes
in.
- Companies say we need to change
- Selection: Which adaptations meet the requirements. Some adaptations (but not all) meet the requirements of their
environment.
- Some of these work, some doesn’t
- Retention: Following the selections. These organizations survive and new entrants copy older organizations
- You survive = everybody copies you. Like fashion.
Determinism: external selection: What’s required from the company. VSR. To achieve competitive advantage it is required.
Voluntarism: internal selection: Companies trying reading environment and coming with products & services. Select, and retain
them…
Limit to the VSR metaphor: Variation
● Variation in business requires a “creative spark”
● Innovation drives variation
Limit to the VSR metaphor: Selection
● Who determines what will be “the next big thing”?
○ The environment, i.e. markets, governments etc. (Morgan, 2006)
● What about internal selection?
○ Product/business development processes/protocols!
Limit to the VSR metaphor: Retention
● Retention requires both learning and sensemaking (Burgelman, 1991)
● Firms’ actions co-determine survival, as opposed to biological species
● Learning enables new developments; sensemaking gives meaning to the new developments that are “selected”.
Dialectical thinking and co-evolution (Albatecola, 2014)
Adaptation is a dynamic process that is the result of the relative strength and type of power or dependency between
organization and the environment. Both strategic choice and environmental determinism provide thrusts for change. Your external
and internal environment.
Coevolution: two different VSR processes happening at the same time (one in external and one in internal environment)
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, Environmental Fitness as a gateway
● Whether your adaptation is suited to the environment. Lady Gaga and bugs.
Environmental Fitness = By reading the environment and making the ‘right’ choices, firms can gain a good fit with the environment.
As a result, they will not get selected out (fail to adapt, resulting in bad performance). So, environmental fit is important for firm
success and survival!Remember not every adaptation is successful...allowing for strategic choice means some firms will change as
their environment changes but their adaptation is not a good fit with the environment and they are selected out...
Fit with what?
● Strategy between internal and external selection environment
● (Grant, 2012)
● (Morgan, 2006) a balance between strategy, structure, technology, the commitments and needs of people, and the
environment
Polaroid Example
● They misread the environment. Neglected market developments. Stuck with what they believe, came up with the wrong
adaptation. Strong internal fit (works with their business development). They selected incorrectly.
● Polaroid thought the fit was technological. They were at the technological forefront. So, they thought they could ‘push’ the
new tech in line with existing thinking (film). The real selection criterion deviated from their beliefs! I.e. their focus was
internal fit, and they neglected market developments. This is where Polaroid failed. Retention.
● Failure of adaptation comes from where they’re focusing on. Nokia, Blackberry, Polaroid…
Feldman and Pentland, 2003 + - Organizational Selection
The Role of Routines
What are routines?
● A routine is a repetitive, recognizable pattern of interdependent actions, involving multiple actors (Feldman and Pentland,
2003, p96). Routines determine how firms (fail to) react to changing conditions. Routines explain change or why change
doesn’t occur. Routines are persistent over time. Stick around over time. Examples: hiring; strategic planning
Problem with Evolutionary Theory
- For evolutionary theory (at least the deterministic part) to work, you need a mechanism for the retention of information.
- This works if routines are stable and do not change over time
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