Evolutionary Processes and Organizational Adaptation: A Mendelian Perspective on Strategic Management

by Daniel A Levinthal

The experimental approach of RCTs and the inferential engine of “big data” and A.I.-based learning algorithms are challenging in the context of strategic actions, where the immediate feedback may not be strongly indicative of longer-run outcomes of interest.

The non-instantaneous nature of selection allows for some loose coupling between the nature of these external forces and the rewards structures and resource allocation mechanisms the organization chooses to impose. These later properties are referred to as the organization’s artificial selection environment. The modifier “artificial” is used to indicate that these selection rules are the product of conscious choice and not directly the by-product of competitive consequences of market processes.

Yet, the application of a framework developed in the context of evolutionary biology toward understanding the pattern of adaptation and change within human organizations poses the significant challenge of identifying parallel constructions and mechanisms in the two domains.

Ideas, business plans, and design efforts do not themselves directly receive rewards from the market.

Diversity can be mitigated by a high degree of centralization of resource allocation as it can be difficult for a single actor to be of “multiple minds” regarding alternatives. However, diversity can also be mitigated by a high degree of socialization and convergent thinking among a set of nominally independent actors (Van Maanen, 1973; Levine and Moreland, 1991).

For many initiatives of interest from a strategic perspective, near-term outcomes are a mere shadow of their ultimate payoff. The difficult challenge in devising selection processes is developing temporally proximate indicators that are suggestive of these ultimate payoffs.

Thus, real options may certainly be applicable to situations of well-defined risk, where there is uncertainty over known possible states of the world, but are deeply problematic in the face of more ambiguous environments.

Thus, a choice of niches in which to operate is, effectively, a co-evolutionary bet on what opportunities the niche may offer and what trajectory of capabilities and resource the niche may engender.

Since progress along these dimensions is not necessarily correlated, minor departures from routines that show trivial progress along established dimensions might yield significant progress along alternate metrics.

However, many of the economic actions in which we are most interested have the property that their full implications are not realized until some future time period. This is particularly true in the context of the development of new technologies where contemporaneous market feedback regarding possible merit is not feasible or at least may not be reliable.

The Mendelian executive is not, in a direct sense, the answer to these challenges, but rather a crafter of an organizational culture and organizational structure that facilitate a robust and ongoing process of search and discovery. A few basic principles are suggested below that might inform such efforts.

The term agnostic selection is used to highlight the importance of a challenging duality of engaging in rigorous internal selection to facilitate the weeding out of less promising paths and the amplification of more promising pathways, while at the same time having a large dose of humility as to what selection criteria might best be invoked.

As highlighted in our discussion of selection, a fundamental role of the organization is to mediate between the selection forces of the overall economic environment and the particular projects, initiatives, and individuals within the organization.