Jeff Greenstein June 18, 2020 Today the commonly accepted conclusion of Charles Darwin’s seminal work, The Origin of Species, is that the bedrock of evolution is “survival of the fittest.” In actuality, this interpretation represents a morphing of what Darwin proclaimed centuries earlier. His key theory was that evolution favored the survival of the most adaptable, not the fittest. The distinction is subtle yet profound, and particularly relevant when thinking about businesses since the onslaught of COVID-19.
Life and business are unpredictable and rarely follow a straight line or work out as anticipated. Things that aren’t supposed to happen actually happen more than statistics predict. Regardless of how conscientious and thorough our planning, the future remains a giant question mark. Chinese culture responds to this inevitable feature of life by espousing the philosophy that “with certainty, there will be uncertainty sometime in the future.”
Uncertainty is inescapable which by default necessitates adaptation. According to Darwin, those that prosper will be the ones most adaptable to life’s vagaries.
The need to adapt is essential because despite our best efforts and intentions, it is virtually impossible to know what lies ahead. The never-ending flood of books, interviews and statements by experts, supremely confident in their prognostications, rarely get it correct.
Among my favorite historical predictions was when computer titan Michael Dell was asked in 1997 what he would do if he was running Apple Computer, “I would close it down and return the cash to shareholders.” Dell’s assessment of Apple’s future was 180 degrees wrong. Instead of fading into oblivion, Apple adapted and went on to become the most valuable company in the world. Apple’s innovation in the mobile marketplace is sharply contrasted by Nokia, the unquestionable leader in mobile telephony who failed to react and faded into oblivion.
Without a crystal ball there will inevitably be surprises tomorrow, next week, next month or next year to which one must adapt. Sometimes only minor course corrections are required and at others, wholesale readjustments are essential.
In recent history, there has never been a moment quite like this; the COVID-19 crisis has pushed businesses to adapt at a speed and scope never before contemplated. Moreover, navigating the uncertainties that lie ahead will require nimbleness to adapt in short order. Transitions that might have occurred over many years are being condensed into months, if not weeks.
Accepting the inability to accurately predict the future means we have no choice but to approach the future knowing that unexpected outcomes will occur. Instead of becoming frustrated or unglued when the best laid plans go awry, expect surprises. Be prepared to remain flexible and adapt where needed. This mental preparedness will enable you to remain level-headed and “go with the flow.” Be open to what circumstances dictate and respond promptly and decisively.
As legendary UCLA basketball coach John Wooden said, “Failure is not fatal, but failure to change might be.” The businesses that exhibit these qualities and embrace this reality will be the ones standing when the crisis subsides.
Successfully adapting requires pliability. Building and retaining options affords flexibility and eliminates the constraints imposed by rigidity. An option may have minimal value when its probability of use is low, but it can become extremely valuable if circumstances change and it needs to be exercised.
When I was trading in the financial markets my goal was to accumulate low priced options that one day might offer enormous payoffs. This optionality may take the form of insurance that protects you in the event of a disaster, or enables you to quickly pivot and capitalize on an emerging opportunity. Sometimes these options represent tangible instruments and plans, and other times it is just the conceptual mindset to react. The mental exercise of thinking about, creating and managing options can be fundamental to successfully navigating personal and business gyrations, even if the options are never utilized.
Business history is littered with companies that refused or dismissed the importance of incorporating optionality into their mindset. Most frequently, the disruption triggering these falls is driven by technological advances, changing customer preferences, competitive pressures or market supply and demand forces. Intransigence to these developments caused stalwarts to become obsolete often because either their heads were buried in the sand or their structures were too rigid to bend.
Clayton Christensen in his groundbreaking book, The Innovator’s Dilemma, summarized these two factors:
“An organization’s capabilities reside in two places. The first is in its processes—the methods by which people have learned to transform inputs of labor, energy, materials, information, cash, and technology into outputs of higher value. The second is in the organization’s values, which are the criteria that managers and employees in the organization use when making prioritization decisions.”
The speed and severity of the disruptions caused by COVID-19 across multiple levels have required business to adapt like never before. Many technologies have been accelerated out of necessity and consumer behaviors have shifted due to health concerns. The companies that survive and thrive will be those adroitly able to adapt to a “new normal” while, maybe most importantly, remaining flexible to a still very uncertain future.
Massive transformations, especially those linked to remote technologies, have been rapidly adopted. Trends that were anticipated to occur over years, if not decades, have occurred in weeks or months. Among the most pronounced of these examples is the delivery of healthcare. Although virtual care or telemedicine has been around for over a decade, the utilization rates are often found in the single digits. Now, amidst the virus, patients and doctors alike are doing their best to avoid visiting potentially germ-infested doctor’s offices, urgent care clinics or hospitals unless critical.
Consumer behavior has likely changed forever. Physician practices able to adapt to this paradigm shift will survive and thrive, whereas those unable or unwilling will most certainly struggle. Consumer banking, education, retail, travel, hospitality, commercial real estate are all sectors experiencing similar disruptions and the need for radical transformations. The businesses that prevail will not necessarily be the strongest at first, but the most adaptable.
Remote and random events will happen, and they will keep happening. The future ramifications associated with COVID at this point are unknown. Rather than fight or deny how reality has changed, the strongest will be the ones who accept and make the most of it.
Instead of fearing uncertainty in the months and years ahead, it must be welcomed with the confidence that the mindset, tools and flexibility exists to successfully adapt to the opportunities and challenges ahead. I believe the businesses that emerge stronger from this crisis will be those that embrace what Darwin really said – evolution favors the most adaptable, not the fittest. If anything, Darwin’s theory could be extended to incorporate the survival of the mentally fittest, because those who are mentally fit are the ones capable of swiftly adapting to whatever is thrown their way.
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