The Organization in a Changing Environment

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The Organization in aChanging Environment
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Businesses and other organizations are complex
adaptive systems, composed of elements that
evolve both from the top down and from the bottom
up.
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Businesses and other organizations are also
components of larger complex adaptive systemsthe
societies and economies of which they are part.
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The societies and economies of which businesses
and other organizations are part are complex
ecologies with

• Competition for limited resources, through
  exploitation and interference
• Predation and parasitism
• Cooperation and coalitions
• Evolution

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Business and other organizations are of
themselves ecological systems, whose subunits
exhibit

• Competition
• Predation and parasitism
• Cooperation and coalitions
• Evolution

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Challenges in managing ecosystems

• Expanding ecosystem services, while
• Maintaining adaptability and resiliency in
  changing environments and
• Minimizing run-off and other negative
  externalities.
• Note that natural ecosystems need not show any
  of these properties.

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Organizational challenges

• Finding new opportunities for growth, while
• Maintaining adaptability and resiliency in
  changing environments and
• Minimizing undesirable societal costs
  (externalities).

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How do we explain
Regularities at level of ecosystems and
biosphere? Homeostasis?
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Teleological Gaia
Kirchner, 1991
the Earths atmosphere is more than merely
anomalous it appears to be a contrivance
specifically constituted for a set of
purposes Lovelock and Margulis, 1974
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Problems with Gaia
Gaia describes macroscopic regularities.
Evolution operates at lower levels, and not
for benefit of whole system.
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Complex Adaptive Systems
sustained diversity and individuality of
components localized interactions among those
components and an autonomous process that
selects from among those components, based on the
results of local interactions, a subset for
replication or enhancement.
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EVOLUTION Balance between homogenizing selection
and generation of new variation COMPLEX ADAPTIVE
SYSTEMS Self organization from existing
variation (loss of diversity/dimensionality) Emer
gence of new variation (gain of
diversity/dimensionality)
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Classifying Complex Systems

• Top-down versus bottom-up
• Engineered versus self-organized
• Level(s) of selection

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Complex systems

• Self-organization without global selection or
  design (River basins)
• Self-organization guided by global selection or
  design (Human development)
• Self-organization guided by local selection or
  design (Development of
  ecosystems,
• economies and societies)
• Where do organizations fit?

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Adaptability and resilience in changing
environments

• Organizations
• Anticipating and dealing with catastrophes and
  opportunities, endogenous and exogenous.
• Maintaining infrastructure.

• Ecosystems
• Anticipating and ameliorating catastrophes, such
  as pest outbreaks.
• Maintaining diversity and redundancy.

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In Nature, there are a variety of evolutionary
solutions (and challenges)

• Reversible mechanisms
• Physiology (Acclimation, homeostasis)
• Behavior (Torpor, movement, etc.)
• Irreversible mechanisms
• Development
• Evolution
• Are organizations so different?

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Evolutionary portfolio management

• Movement (dispersal and foraging), dormancy and
  reproductive scheduling all spread risks over
  lifetime, and allow exploration of new
  opportunities.
• Mutation, sex and recombination spread risks for
  genome, and allow exploration of new
  opportunities.
• Biodiversity is key to ecosystem productivity and
  resiliency. But how is it maintained?
• Social norms reinforce accepted behaviors.

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Organisms, genomes and ecosystems all face
changing environments.Challenges

• Adaptability and resiliency in changing
  environments.
• Competition.
• Ecosystems and the biosphere are complex adaptive
  systems.

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Evolutionary analysis

• Satisficing
• Optimization
• Frequency-dependence
• Two-player games
• Multiple-player repeated games
• Emergence and externalities
• Organizational and business analogies are strong.

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Evolutionary analysis of the business world

• Satisficing Typewriter
• Optimization Genetic algorithms and the diesel
  engine
• Two-player games Airline pricing in
  small markets
• Multiple-player repeated games Airline
  frequent flyer programs
• Externalities Problems of the Global
  Commons