How Business Is a Lot Like Life

One way for a company to respond in biological terms is by using the corporate equivalent of sexual reproduction. If the goal is to create change, it's clear from nature that sexual reproduction creates far more mutation and variety than parthenogenesis, or other forms of reproduction through which living organisms clone themselves. So the question for an organization that's trying to act like a living system is, Are we only generating clones as we bring in the next generation, or are we using cross-pollination to wake this place up? It goes back to disturbing the organism's equilibrium.

That is what mergers and acquisitions can do. For example, GE Capital Corp. makes 100 small acquisitions a year, deals that refresh its corporate gene pool. In fact, if you look at how GE tends to operate, it follows a consistent pattern: Amplify survival threats and foster disequilibrium to evoke fresh ideas and innovative responses. Other companies, such as Capital One, Cisco, and Enron Corp., have the same patterns. These groups regard acquisitions as a way of acquiring the DNA of the software and hardware engineers or of the financial engineers. That's at least as important as acquiring the customers or the underlying technology platform.

And then there's the question of how you can use that new DNA after you acquire it. For example, GE Capital holds "dream sessions" in each of their 28 businesses. Once each year, they bring in a group of their people who are under 30, who have young ideas, and who are on the edge of the organization in some fashion. You can only come if you meet those criteria. Then they ask them, "Where are the next new ideas?" The whole point is to tap into the new DNA in a fresh, powerful way.

Other companies are less welcoming to new DNA. They represent the enemies of sex. The top managers may try to bring in outsiders, but the board will limit those new voices, rather than amplify them. The social system of every company creates norms -- the insiders usually have a strong defensive reaction to new people with new ideas. So the social context of most companies usually operates to prevent new DNA from entering the organization. In that sense, they are enemies of sex.

The second biological law you cite is that companies need to steer near to the edge of chaos. How does that law apply?

If you tell most executives that they need to move their company to the edge of chaos, they will immediately think of a place -- a precarious spot. The image is one of taking your canoe to the edge of a waterfall. In fact, the edge of chaos is a condition, not a location: For an executive, that means operating your company in such a way that it experiences the maximum and most productive levels of mutation.

Take Capital One. It's another example of a company that has come from nowhere and has risen to become one of the largest credit-card issuers in the United States in a very short period of time. The leaders in that company have encouraged the organization to be innovative by embracing relentless discomfort -- and to do it without driving themselves so hard that everyone self-destructs.

So what does the edge of chaos look like for them? First, all of the associates in the company are given charters to innovate. These associates see themselves as champions of ideas. They are encouraged -- not just allowed, but encouraged -- to ignore anything that might distract them from the next big idea. Being obsessed with creativity is a good thing.

Second, to keep the organization from going completely off the edge, the leaders say that if an error occurs, it's everybody's fault, not somebody's fault. What that means is that while every associate is encouraged to come up with the next big idea, if something misfires, then the company doesn't engage in a lot of finger-pointing and blaming. People within the organization see themselves as entrepreneurs who are responsible for identifying and satisfying customer requests. Their aim is to come up with 10 or 12 new experiments or probes each day, using pricing models, demographic profiles, and other tools to come up with new angles and ideas. One example: They started with credit cards, and now they've moved into cell-phone packages, offering different pricing schemes for different types of cell-phone users.

Third, the leaders in the organization keep a careful watch on how teams are performing, and if a team looks like it has moved too far back from the edge of chaos, then senior management will move the team around. They'll pull some people out of one team and introduce some new people, all for the sake of keeping the creative-energy level high. The company's leaders take very seriously the idea of increasing variety, both internally and externally: They mix things up internally on their own teams, and they network externally with venture-capital firms to look for ideas that they can bring inside.