How Business Is a Lot Like Life

Leave it to the dynamic, volatile, fast-paced new economy: Just when you think you know how to design your strategy, organize your team, and connect with your customers, something unanticipated, unexpected, and unsettling comes hurtling at you. It is, says Richard T. Pascale, a lot like life. "Let's be clear," says Pascale. "The idea of 'living systems' isn't a metaphor for how human institutions operate. It's the way they really are." In a recent book, Surfing the Edge of Chaos: The Laws of Nature and the New Laws of Business (Crown Business, 2000), Pascale, with coauthors Mark Millemann and Linda Gioja, proposes a system of thinking and managing that Pascale believes represents the way that companies need to adapt in fast-changing times.

"Rapid rates of change, an explosion of new insights from the life sciences, and the insufficiency of the old-machine model to explain how business today really works have created a critical mass for a revolution in management thinking," Pascale says. Pascale's approach has been to start with serious business practices inside of serious organizations -- from the U.S. Army to Capital One Financial Corp., from Monsanto Co. to Royal Dutch/Shell Group -- finding techniques and tactics that reflect the principles of living systems. From those observations, Pascale has distilled both a set of laws and a compelling body of supporting evidence to suggest that the first rule of life is also the first rule of business: Adapt or die!

You're calling for new rules for business. What were the old rules?

If I had to generalize, I'd say that the old rules of the game rested on a management method that I call "social engineering," which operates according to three premises. First, intelligence is located at the top; Leadership is the head, organization is the body. Second, change is predictable. That is, when you design a change effort, there's a reasonable degree of predictability and control. Third, there is the assumption of cascading intention: Once a course of action is determined, initiative flows from the top down, and the only trick is to communicate it and roll it out through the ranks.

Those three assumptions are deeply baked into the minds of most executives. Those assumptions are so fundamental to how we think about business that it's hard even to be aware of how they govern the way that organizations are run.

So if those rules no longer apply, which rules do?

The first new law of life that leaders need to recognize is that equilibrium equals death. Companies that achieve homeostasis in their environment may enjoy a period of time when equilibrium really works. It may give them a dominant position, and it may result in outstanding economic rewards. But it makes them increasingly vulnerable to the moment when the game changes. Because when the game changes, their winning formula from the previous period becomes their own worst enemy.

Jim Kennedy, a former IBM executive, tells the story of how IBM experienced a steady erosion in the mainframe business. When Lou Gerstner took over as CEO, he wanted to understand how the company had managed to ignore this development for so long. Kennedy and his team were asked to take a look at strategic plans throughout the year. Kennedy says that they actually found several rooms full of strategic plans. But as the erosion in market share continued, the real strategic plans amounted to a couple of senior executives stepping into a room, closing the door, and deciding to raise prices. That's a classic example of an organization settling into equilibrium and then becoming a captive of its winning formula.

What does it take to break free from this law of equilibrium?

Companies have to ask themselves, Does the formula that has gotten me where I am still work? Or am I about to become a victim of my own success? Has the environment changed so that I'm wedded to a former winning strategy that won't win in the new world? Think of competitors in the world of the high jump. For decades, everyone went over the bar using the straddle technique. Then along comes Dick Fosbury, and he invents the technique of jumping over the bar backwards -- the famous Fosbury Flop. Which technique do you decide to use?

When the world around you changes, maintaining your equilibrium is a threat to your future existence. That's when you need a new kind of agility that enables you to reinvent yourself. Very simply, prolonged equilibrium dulls an organism's senses and saps its ability to arouse itself appropriately in the face of danger. Survival favors heightened adrenaline levels, wariness, and experimentation.

Which tools can companies use to escape from equilibrium?