Robust adaptive strategies

Strategy development requires that managers predict the future in an inhere ntly uncertain world. Many mistakenly do so on the basis of perceived histo rical patterns that, according to recent scientific understanding of comple x systems, do not have great predictive value. Complex systems consisting of many dynamically interacting parts are diffic ult and often impossible to predict because they exhibit punctuated equilib rium (periods of relative quiescence interspersed with episodes of dramatic change) and path dependence (small, random changes at one point in time th at lead to radically different outcomes later). What, then, is a strategist to do? Beinhocker recommends cultivating and managing populations of multiple stra tegies that evolve over time, because the forces of evolution acting on a p opulation of strategies make them more robust and adaptive. Because both bi ological evolution and business evolution are complex adaptive systems, to better understand business strategy, managers can employ a tool that scient ists use to better understand biological evolution. An imaginary grid calle d a fitness landscape is an aid to comprehending how evolution increases th e odds of survival in nature. In general, the rules for success in fitness landscapes also apply to business problems, though their specific applicati on differs significantly by company and situation. The lessons of fitness landscapes offer an untraditional picture of what a company needs to develop a successful strategy. Because shifting an organiz ation to this way of thinking about strategy is not easy, a company can tak e six actions to reinforce the robust, adaptive mind-set: Invest in a diversity of strategies. Evaluate strategies as real options that may open future possibilities, and remove biases that undervalue experimentation and flexibility. Diversify strategies along three dimensions time frame, risk, and relatedne ss to current business. Ensure that the strategies include sufficiently diverse initiatives in prom ising areas. Check that selection pressures on the firm's population of strategies refle ct those operating on the population of strategies in the marketplace. Use venture capital performance metrics.