The Evolutionary Edge

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In a faster, flatter, less predictable world, the only competitive advantage left is an evolutionary advantage.

In just five years, Capital One became a $7.8 billion dollar business thanks to an obsession with experimentation – generating over 28,000 individual trials with their customers per year.

Zappos, the e-tailing firm which sold to Amazon for $928 million, proved their market by taking photos of shoes in existing stores and selling them in small batches online.

Betabrand, a fashion startup in San Francisco, creates and tests five new products every week with only 17 employees at the helm.

Quirky, a $50 million dollar manufacturing startup, tests three new products a week that are all generated by their community of over 1 million inventors.

Google experiments with their own people in order to drive productivity.

Netflix open sources their testing engine, Chaos Monkey, to ensure cloud based systems can endure failure.

Dropbox, the storage juggernaut, debuted simply with a video demonstrating its services and generated over 70,000 initial signups.

Google runs up to 100 million tests a day to validate their own systems.

At Facebook, any engineer can essentially modify the site’s live code to test a new feature.

The average time between code changes at Amazon.com is 11.6 seconds.

Valve, one of the world’s most successful gaming companies, employs an experimental psychologist that monitors eye tracking and perspiration response to create more engaging gameplay.

To win the 2012 Presidential election, the Obama campaign employed a data science team of almost 100 people.

At Etsy, teams can ship live code directly into production, improving the site experience at least 30 times a day.

Airbnb built its own A/B testing platform to better understand how to maximize bookings.

In 2012, Proctor and Gamble trained their staff in design thinking to gain better insights into how their customers use their products – and doubled the financial impact of their innovation efforts.

Netflix has become an original content powerhouse by analyzing what viewers want based on their viewing habits.

OKCupid, a dating site, has grown to over 12 million users by continually experimenting with those users – and even keeps a blog about those experiments.

Spotify steers over 40 autonomous teams, impacting up to 24 million active users, with streamlined metrics.

In the wake of battery fires, Tesla upgraded every car on the road and increased their ground clearance with a simple software update.

Facebook rallied their staff to double their mobile advertising take in just one year after they admitted it was a problem.

“It is not the strongest or the most intelligent who will survive
but those who can best manage change.” — Charles Darwin
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A New Way of Working

Today’s most successful firms have discovered a new way of working that enables them to thrive in dynamic and even volatile conditions. The ability to change is their competitive advantage.

We call this The Evolutionary Edge.

From the outside, The Evolutionary Edge appears as four behaviors:

  1. More experiments, executed more quickly, in more areas of the business
  2. Actionable insights developed from experimentation with real customers
  3. Swift and effective collective action driven by insight
  4. Organizational endurance for sustained hypothesis testing and self-disruption

These behaviors drive organizational evolution. Together they fuel faster cycles of discovery, development, defense, and recovery – in turn catalyzing growth and ensuring greater resilience.

“Creative firms of all kinds know that they must evolve at LEAST as fast as the world is changing around them.” — Tom Kelley

Social organization, from the nuclear family to the limited liability corporation, is a problem solving strategy. Animals hunt in packs to confront larger prey and people form businesses to confront larger opportunities. Therefore, social organizations emerge in response to their environments.

Today, the environment is faster, flatter, and less predictable than ever before. Shifting consumer demands, unforeseen competition, cultural tides, and market volatility coalesce more quickly now. Instead of doubling down on planning, prediction, and control, organizations should instead mirror an environment defined by change. The more an organization can adapt its internal structure and systems of behavior to respond to present and emerging conditions, the more successful it will be.

Today’s most successful firms literally harness evolutionary forces to adapt faster than their peers – they speed up experimentation, selection, and mating within their operations to find and capitalize on new opportunities. These companies are lean, mean testing machines, capable of wide-scale experimentation, intuitive insight generation, and collective action (as well as continued endurance).

 

Honing Your Evolutionary Edge

Since the global economic collapse of 2008, we’ve been studying how organizations (and organisms) evolve in the face of change. Our studies and experiments have taken us from the halls of academia to the boardrooms of the world’s largest enterprises. What we’ve found is a set of underlying conditions that need to be present for an organization to fully and continuously adopt an Evolutionary Edge.

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We define these conditions across three nested domains: Strategies, Structures, and Systems.

At the highest level, these organizations pursue a suite of strategies developed with the context of their markets and their customers. They oversee structures which can easily adapt to the direction and implementation of those strategies (and the surprises inevitable in the process). Lastly, they deploy internal systems which enable autonomous and self organizing teams, rather than limiting human agency.

While this nesting of domains is straightforward, for many existing organizations the ordering may seem counterintuitive. Often, we encounter teams restricted in their work by the systems underpinning their organizations. We find structures not designed for the company’s ambitions, but based on the category’s standard way of working. We find strategies not defined in relation to a customer, but to an internal or market-driven need. Unfortunately, we have yet to find a firm that rejects this nesting of domains and embodies the behaviors of an Evolutionary Edge over a prolonged period.

STRATEGIES

The vision, ambition, and intention of the organization, in relation to its environment, over time

A traditional organization undergoes lengthy yearly planning cycles (sometimes up to two years in advance) where managers are expected to determine the year’s organizational mission (sometimes re-writing its purpose), it’s actions, and the resources required to take those actions. Most of the time, this is an exercise in copy/pasting last year’s plans and struggling to do more with fewer resources. This whole endeavor is an effort to reduce uncertainty – but the biggest producer of uncertainty is the environment outside of the organization – and no Excel formula or Powerpoint slide can reduce that uncertainty. Inevitably, conditions outside (and often inside) the organization change and those meticulously prepared plans are either abandoned, or worse, still followed.

An Evolutionary Edge helps organizations shift from rigorous planning cycles to defining and deploying adaptive strategies. However, adaptive doesn’t mean absent. Any organization must have the bedrock of their vision, mission, and values to build from. These should be reflected on and revised slowly over time.

When we examine an organization, we want to see strategies which are:

  • Aware – devised (and adapted) through sensory perception of the environment and in anticipation of probable conditions
  • Aligned – unpacked in harmony among teams and individuals
  • Mutually Beneficial – defined as a shared outcome with customers and partners in the supply and distribution chains
  • Supported – embraced by individuals, fed by resources

STRUCTURES

The relationship between individuals, teams, roles, disciplines, and hierarchies, both within the organization and extending out to customers and partners

A traditional organization structures their people as they structure their titles – by hierarchy and discipline. Too often this leads to fiefdoms, messy hand-offs, blocked progression (no one can progress above their own boss), and a lack of customer involvement. Meanwhile, it becomes harder for teams to determine customer-based strategies when their work is centered around their own discipline or silo’d channel.

An Evolutionary Edge helps organizations develop structures which are focused on their customers and able to adapt quickly to changes in strategy(based on changes in the market). Ultimately, these organizations are experts in collective action, directing individuals and teams to confront new challenges with speed and focus.

When we examine an organization, we want to see structures which are:

  • Consumer Outcome-Based – teams designed around explicit and measurable customer facing outcomes (e.g. resolve customer complaints, deliver products within 2 days) over channels (e.g. website) or disciplines (e.g. design)
  • Lean – teams populated with only the members essential to the work
  • Autonomous – teams given diverse skills and control needed to take an experiment to market without interference or interdependence
  • Porous – internal structures which are permeable to additional resources, communities, partners, and all other teams
  • Self-Organizing – teams granted the authority and resources to assemble, adapt, or disband based on evidence

SYSTEMS

The rules, tools, processes, and frameworks which influence individual and collective behavior within the organization

Traditional organizations deploy systems which can scale indefinitely, rather than adapt over time. These systems are often managed by a select few, enforced with an iron fist, and rarely take seriously the employees of the organization as their ultimate customers. Moreover, as organizations scale, these systems often require more and more human support, even though competitors begin to scale using more automated systems.

An Evolutionary Edge helps organizations deploy systems which are malleable based on the organization’s team structures and strategies. Moreover, these systems (whether they manage email or compensation) are created for employee need, rather than rigid operational efficiency, which make them not only better for getting the work done but also a competitive cultural advantage over the company’s peers.

When we examine an organization, we want to see systems which are:

  • Simple – systems which are intuitive, uncomplicated, and interoperable
  • Transparent – systems which are explicit and distributed
  • Plastic – systems which are malleable in pursuit of the organization’s strategy and in support of the organization’s structure
  • Automated – beneficial systems which initiate or take place without conscious human action
“The important thing is to be able at any moment
to sacrifice what we are for what we could become”
— Charles Dubois

 

Making the Transition

In evolution, natural selection is responsible for traits gradually becoming more or less common among a population. In organizations we have the benefit of artificial selection – or selective breeding – to manipulate which traits are reproduced and thus repeated from project to project rather than relying solely on tradition or the status quo.

The challenge, however, is three-fold. First, we have to know which traits we are selecting for and which individuals and teams are most desirable (both among our current employees and potential hires). Therefore we need a way to objectively measure and identify these traits (hence why every project we conduct begins with a survey assessment). Any organization can start by simply reducing the role that internal politics and favoritism plays in rewards and dismissals.

The second challenge is that the duration of the process is dependent on the speed of our organizations – whether it’s the time it takes to cycle teams, start new projects, or promote new leaders. Most organizations design their processes to be less open to change, and therefore adopting an Evolutionary Edge might be slower than we’re actually capable of implementing (whether because of our attention span or tenure). We recommend that clients spin up new projects or team pilots just to kickstart the process of selection and reproduction (ie, when team members split up and take these new traits to other teams).

The third challenge is less obvious but perhaps more sinister – homogenization. Now that we know which traits to select for and have some existing candidates already in mind, we’re susceptible to the risk of hiring or promoting only those that share cosmetic similarities (influenced by our biases) to the initial candidates. This is how organizations end up with more of one gender, or more of one race, or more of one personality type – all of which make our organizations more fragile to change, not less. In our organizations, as in nature, variety and diversity are absolutely critical to long term sustainability.

 

Taking the First Step

The best day to start implementing these behaviors and traits into your business is today. The best project to start with is the one in front of you. But by no means should you start by emulating every trait or by adapting every project. Every organization is unique (because every organization is a complex system). Some traits will be harder to change and some will be stickier based on your culture.

Begin by testing just one new trait on the project you are either leading or contributing to. You could try simplifying the process, or fielding a multi-disciplinary team, or unpacking and aligning the organization’s strategy with your department’s goals. Regardless, pick one, try it on, and see how it it suits your needs and organizational context. Then try another and adapt it based on what you’ve learned. Wash, rinse, evolve.

 
 

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EssaysBud Caddell