Evolve-Ability: The need for an Adaptive business evolution

Adaptability is a fundamental competence that organizations must have to achieve sustainability. The ability of any system to adapt transcends the world of organizations and has been a major focus of study in disparate disciplines, from the social sciences to physics and biology. However, the ability of organizations to adapt has gained prominence as changes in the business environment become more rapid and less predictable. Adaptability can be defined and studied at different levels, if we do not distinguish between them, we may contribute confusions which can lead to poor decisions and ineffective execution. Therefore, borrowing from concepts commonly used in biology, I propose to use the term plasticity to refer to the ability of an organization to adapt to changes within a business model (e.g.,?changes in relative prices, the appearance of a new technology that does what we already do but more efficiently, or any other element that does not challenge the current business model.) and to reserve the term?Adaptability, to refer to the ability of an organization to modify structural aspects of its business model – it’s DNA. I argue that Agile Methodologies can provide Plasticity but do not necessarily provide long-term, structural Adaptability. We need organizational agility to embark on an evolutionary adaptative business process.

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Keep Flowing and Morphing

The Constructal law[i] derives from physics and says that life is movement and transformation. To be alive is to keep flowing and morphing. This law states that a system that stops flowing and changing is dead. Adrain Bejan and J. Peder Zane, authors of the book Design in Nature, How the constructal law governs evolution in biology, physics, technology, and social organization, argue that nature itself is designed so that everything flows, the slopes, the roots of trees, the processes of evaporation and condensation, and so forth. Although this law is not unanimously accepted, and there are critics, the concept is valuable and inspiring when analyzing the direction that the transformation of organizations should take. Concretely, it indicates that we must identify the flow and work to minimize the frictions that may exist while taking care to facilitate it.

There is no doubt about the importance of our ability to adapt, but in the world of organizations, as in genetics, adaptability - the ability of an organization or organism to adapt appropriately to its environment - can occur at different levels. When one looks at all the notorious technological solutions, we can quickly verify that what they do, in essence, is to decrease friction. Less friction to apply for a loan because I can do it from my mobile, less friction to get from point A to point B because I have a map that shows me the optimal route, and less friction to transfer money or to buy any product because I can do it by pressing a button on the device of my choice. And the problem is that when we call things that are, in essence, different things by the same name, all we do is create confusion, and when we have that disorder, we think badly and make bad decisions.

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Geneticists already knew it

Geneticists S.J. Gould and R.C. Lewontin published an inspiring paper in 1979 called "The Spandrels of San Marco and the Panglossian Paradigm, a critique of the Adaptationist Programme"[ii]. They argue that there are different levels of adaptation and that evolutionists are often wrong to extend the Darwinian mode to different levels of adaptation. For instance, Phenotypic plasticity, defined as “the ability of individual genotypes to produce different phenotypes when exposed to different environmental conditions”[iii], operates at a very different level form Darwinian adaptation, which has to do with the ability to adapt through genetic variation.

The organism has encoded in its DNA the capacity to respond to environmental changes within the margins imposed by its genotype. The phenotype of an organism is the result of its genetics and the environmental conditions in which it developed. But phenotypic plasticity does not prove robust to structural changes, such as climate change. In these cases, a paradigm shift is required, a modification at the level of the genotype. A clear example of Adaptation by introducing changes at the genotype level was the so-called "Green Revolution". In which Borlaug, among others, introduced dwarfing genes into wheat. Thus, short-stemmed wheat could support the heavier weight of fertilized ears and was a key element of the Green Revolution in developing countries. In other words, some aspects are structural and impose a constraint on our adaptive possibilities. Gould and Lewontin take the case of the dome of St. Mark's Cathedral in Venice and explain the significance of each mosaic with its detailed iconography. It is all so impressive that one is tempted to think that the architecture was made in function of the mosaic it was intended to represent. Still, the truth is that, for example, the conical triangular spaces formed by the intersection of two semicircular arches derive from the necessity of mounting a dome over semicircular arches and not the other way around. Therefore, the architecture confers a restriction, i.e., limiting our possibilities.

When we do not visualize this, we tend to think wrong. In other words, we don't have arms because our T-shirts have sleeves; it's precisely the other way around. Often, when technologies emerge that have the potential to remove an initial constraint, we fail to generate the necessary adaptation to take advantage of it.

Adaptability vs. Plasticity

At the organizational level, something like what S.J. Gould and R.C. Lewontin suggested tends to happen: there is constant talk of agility and adaptability without considering that there are different levels, which contributes to confusion. There are two primary levels. On the one hand, we have adaptability at the level of practices and on the other, adaptability at the level of the business model. I will call the former Plasticity (or adaptability with a lowercase "a") and the latter Adaptability. Following the line of comparisons, which are imprecise and only aim to reinforce a conceptual idea, we can say that Plasticity operates like phenotypic plasticity and allows us to adapt, within a paradigm, according to the environment. Adaptability, on the other hand, has to do with changes in the genotype.

According to Agile Alliance, "Agile" is the ability to create and respond to change; it is the ability to cope with an uncertain and turbulent environment and ultimately succeed[iv]. So, agility is about the ability to adapt and respond to change. The point is that this adaptation, as I mentioned earlier, operates at two different levels.

Martin Fowler, one of the authors of the Manifesto for Agile Software Development, says that they decided to use the term Agile to describe the "breeds of agile methods"[v]. Naturally, these approaches emerged before the Manifesto, but they established a set of values on which they are based and principles that guide these practices. Therefore, agile methodologies are those practices that align with the four values and twelve principles of the Manifesto[vi], contributing to our ability to adapt at the edge.

Agility beyond the margins of a given business model

Rick Dove, a participant in the Agile Manufacturing Enterprise Forum, published Response Ability: The Language, Structure, and Culture of the Agile Organization in 2001. Some identify this publication as one of the first to address organizational agility extensively. According to Dove, being agile means being competent in change. That is:

·????????Adapting to environmental changes

·????????Countering threats

·????????Capitalizing on opportunities.

Agility is the competence to exist sustainably. In organizational terms, it implies being able to apply changes to the business model broadly, not just changes within the margins of the model.

For this reason, I suggest calling this capability Adaptability (with a capital "A"), differentiating it from the Plasticity (or adaptability with a lowercase "a") provided by the agile methodologies. With this, I am not saying that agile methodologies are not helpful in deep transformation processes involving business model-level changes. In fact, in our book "Leading Organizational Change in an Agile World"[vii] we incorporate these approaches as a helpful element in implementing change. I am saying that the raison d'être of agile methodologies is not to evolve an organization's business model but to add value to the current business through frequent deliveries that incorporate learning through continuous feedback.

The Manifesto for Agile Software Development starts by saying: "We are uncovering better ways of developing software by doing it and helping others to do it" It does not say: "We are uncovering better ways to generate profound changes in the business models of organizations".

Let's go a little further down the level of abstraction and refer to Scrum, one of the most notorious agile methodologies. We can see that the creators themselves state that we could think Scrum “as a way to get work done as a team in small pieces at a time, with continuous experimentation and feedback loops along the way to learn and improve as you go”[viii]. In particular, the name Scrum was inspired by rugby and explicitly referred to when the team comes together to move the ball forward. But this team moves within the rugby pitch and follows the rules of the game.??

Dove argues that organizational agility derives from the ability to manage and apply knowledge effectively. Knowledge Management is about the intellectual capacity to find the right things to act on, and applying knowledge is about the ability to act in response to environmental changes.

The generation of new knowledge creates uncertainty, and for an organization to adapt, it must be able to manage and apply it effectively.

According to the RAE, technology is a "set of theories and techniques that allow the practical use of scientific knowledge"[ix]. Generally, when a new technology emerges, its first application is at the margin of the business model, i.e., we tend to use it to do the same thing we did before in a more efficient way. For example, the first web and mobile banking moved the banking processes from the bank branch to the web and the phone. Some call this reasoning by analogy rather than reasoning by First Principles.

Suppose a new technology comes along that may be useful in your industry. The natural thing to do is ask: How can I do what I do more efficiently? Figure A's framework involves using the technology to get from the start point to the endpoint, with the least amount of travel but within limits set. This situation, metaphorically, has to do with an adaptation at the margin.?

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Given this new technology, we could also ask: What is the best way to get from the start to the endpoint? That could lead us to a path like the one shown in Figure B[x].

If we do First Principles reasoning (the purpose is to get from the start point to the endpoint with as little effort as possible), we may modify our business model to some degree.

Let's continue with the example of banking; digitization started as a process of digitizing existing processes; in other words, it was an iteration of a current business model. So, adaptations are generated from iterations of an everyday way of doing things. I call this plasticity or adaptation at the margin. As part of this process, an organization might be interested in developing digital onboarding with a consumer credit application, analysis, and delivery. To take this challenge forward, it could use agile methodologies that allow it to manage a backlog of epics and user stories that it could prioritize, trying to define a minimum viable product (MVP) to launch to market quickly and then receive feedback from users, re-prioritize its backlog and add features and functionalities to the initial MVP incrementally.

As time goes by and in the context of a disruptive environment, agile methodologies are not only required to reduce delivery times and satisfy customer needs through an agile lifecycle but also to have the ability to adapt the business model of the organization as a whole by doing things that were not done before. In other words, more than agile approaches are needed; you need an agile organization. Being an agile organization implies having what I call: "Adaptability" with a capital "A".

In 2016 we wrote an article called Life Banking in which we said that there had been a change in the way banks relate to their customers, insisting that this was the real phenomenon behind the fact of some new technologies.

Nowadays, we can see how banking is being embedded in people's lives, and now a non-bank institution, such as a mobile phone, vehicle, or agricultural machinery shop, can be the one who effectively sells the credit to the person and not the financial institution. There are also cases in which a Fintech is the one that captures the client, and the bank sells the capacity to process a credit, and the institution charges the Fintech for each time it invokes the credit processing service (API). For the organization to adapt to this new environment, it requires more than agile methodologies, and it must be able to have the Adaptability to modify its business model. Then, it will be able to use agile methodologies to make changes at the margin of this new model.

When one looks at the public transport or entertainment industries, one can see how organizations that have developed in a notorious way, modified their business model entirely, or were born with a different model than the traditional one. Additionally, many of them likely use agile methodologies to incorporate improvements to their value propositions through iterative and incremental processes.

If we do not learn, we do not change

Adapting implies changing, and change is intimately linked, in organizations, to the capacity to learn. At the individual or organizational level, the anthropologist Gregory Bateson[xi] identified four levels of learning, which he classified with numbers ranging from zero to four.

·????????Type zero learning implies not changing, not modifying behavior

·????????Type one learning means adaptability of behavior, but within the same "box", we could assimilate it to an organization's changes within the margins of its business model.

·????????Type two learning indicates going outside the "box" but staying inside the "building" that contains the "box", we could think of modifications to the business model but within the paradigm of the organization's industry.

·????????Type three learning involves evolutionary change; according to Robert Dilts, this learning level involves changes in function, brand, or identity.

·????????Type four is revolutionary, that implies an awakening to something new and transformative. Some technologies, such as generative artificial intelligence, can create unsuspected opportunities or possibilities for all of us. ???

It seems reasonable, convenient, and necessary to know that there are different levels when we address the subject of adaptation (the action of adapting) or adaptability (the capacity to adapt). There is plasticity, that happens within the margins of a business model and Adaptability that involves modifying the business model. It is not a question of thinking that one is superior to the other; they are different things, and both are necessary at certain times and contexts. In addition, at its different levels, we could consider ideas of constructive law and think that this transformation should contribute to a change that facilitates the faster and easier movement of flow, as Adrian Bejan and John Peder Zane said. This flow could be related to communication, learning, payment, transportation, and hotel booking. Remember that, as the constructal law teaches nothing works in isolation, so all flows are part of a more significant flow. This conception is evident not only in nature but also in the world of organizations and technological systems.

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Note:

This article was initially published by Agile Alliance

Original version:?https://www.agilealliance.org/evolve-ability-the-need-for-an-adaptive-business-evolution/

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[i] Design in Nature. How the constructal law governs evolution in biology, physics, technology, and social organization, Adrian Bejan and J. Peder Zane.

[ii] https://royalsocietypublishing.org/doi/pdf/10.1098/rspb.1979.0086

[iii] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2817147/

[iv] https://www.agilealliance.org/agile101/

[v] https://martinfowler.com/articles/agileStory.html

[vi] https://agilemanifesto.org/

[vii] Liderar el cambio organizacional en un mundo ágil, Antonio de los Campos. https://www.amazon.com/-/es/Antonio-los-Campos-ebook/dp/B08HJP8V7H

[viii] https://www.scrum.org/learning-series/what-is-scrum

[ix] https://dle.rae.es/tecnolog%C3%ADa

[x] Images adapted from War Room: How to Use First Principles Thinking for Business. Link: https://www.youtube.com/watch?v=f4NWT7omLVQ&t=180s

[xi] Pasos hacia una ecología de la mente, Bateson

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About the Author:

Antonio de los Campos

Economist (Universidad de la República, Uruguay), Master Certificate in Project Management (Wisconsin University, USA), Diploma in Business (Cambridge University). He attended the Executive Development Program “Managing Organizational Change at Michigan State University (USA). He is a PMP? and Scrum Master Certified (SMC)?.

De los Campos is a founding partner of Project Management Latin America (PMLA)? and author of the book “Monday 08:30 a bridge between Theory and Practice of Project Management”, “Leading Change Management in an Agile World” and “Kanban - An essential guide to understanding and implementing”. He has vast experience in Change Management, Strategic Planning, Marketing, and Project Management in regional and global organizations; he publishes articles annually and works in the real business world.

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Acknowledgment

Gustavo de los Campos, PhD, Professor of Epidemiology and Biostatistics at Michigan State University (MSU), for his valuable contributions to the article, sharing helpful information and suggesting the use of concepts such as phenotypic plasticity as analogies to the business world.