Right now, all of us can be forgiven for behaving like bears confronting winter. That is to say, shutting down and going into hibernation. It certainly feels like a wise course right now, given the current state of the economy.
However, history shows that the great winners in downturns are not those businesses that shrink their production capacities, downsize their labor forces and conserve cash until the economy picks up again. The winners are the ones that try to expand sales -- the ones that grow.
Nature suggests many adaptive responses to harsh or changing environments. While the first order of business during a downturn must be to ensure survival, leaders must also try to figure out how they will gain competitive advantage coming out of this downturn. In some respects, the bear's instincts may be the ones to follow for certain companies. Hibernation can be an effective strategy if you have a short winter and adequate fat, and a normal spring on the horizon. Unfortunately, at least in this instance, it doesn't seem like those assumptions will hold up.
In fact, nature offers four broad alternatives. The first is behavioral strategies. Just as animals change their diets or hunting habits when critical foods run short, businesses might adjust their customer offerings, explore new pricing models, enter new markets or exit others.
The second is social strategies. Animals find advantages in banding together -- either through cooperative or symbiotic relationships. Businesses, too, might try partnering with new suppliers, customers or competitors.
The third is reproductive strategies. In nature, two reproductive strategies confer advantage. One is survival through quantity of offspring. The second is survival through quality of offspring. In business, reproductive strategies typically entail carefully managing the portfolio of new ventures. Do you try many new things? Or do you pick a few ventures and very carefully invest in them your time and money?
The fourth is evolutionary strategies. Sometimes the only way to adapt is to evolve into another form. In business, this constitutes evolving business models. Companies need to foster many business model experiments that have a deliberate degree of redundancy. Why? Because the latent value of their traits may not yet be obvious but could possibly become very valuable as the environment unpredictably shifts. This is considered “preadapting” -- anticipating change.
For this reason, recessionary cost reductions and efficiency initiatives can't be simple exercises, because they might trim critical preadaptive business models or capabilities too quickly. Reducing costs must reflect subtle tradeoffs between short-term survival and long-term advantage. Companies need diversity in their experimentation so that they can be resilient in the face of upheaval and change. Doing so will make them the most fit to survive.
This article is adapted from “Nature’s Rules,” by Martin Reeves, which appeared in the Spring 2009 issue of MIT Sloan Management Review. The complete article is available at http://sloanreview.mit.edu/smr/.