Clem Sunter

Darwinomics

2010-01-27 10:14

Darwin's principle of natural selection has two elements to it:

- nature is constantly changing and if a species does not adapt to the changes, it becomes extinct;

- within a particular habitat, there is intense competition and only the fittest (those who have adapted successfully) survive.

Transposed to business, the principle of market selection also has two elements:

- the market is constantly changing and if a company does not adapt to the changes, it goes out of business;

- within a particular niche, only the most competitive companies are selected by the market to survive.

Think about it. Most species last millions of years but very few companies last 50 years, a handful 100 years, and only the exceptional one 150 years or more. The time frame is much shorter because the market changes much more quickly and dramatically than nature. The commercial world is more brutal. For example, any company that has lasted 100 years has been through two world wars and a great depression.

Chantell Ilbury and I have devised a Darwinian gameboard by which you can judge the sustainability of your business in these circumstances. It goes like this:




Let's deal with the horizontal axis first. On the right, the market for your product is strong and your niche is growing. In the centre your market is stagnant and, on the left, it is actually diminishing as a result of either a shift away from your product or a general deterioration in economic conditions.

On the vertical axis, the top half of the gameboard means that you are fitter than your competitors; in the middle you are on a par; and in the lower half they are fitter than you.

The gameboard yields four possible states for your business. Bottom left, you are uncompetitive in an unattractive market. This scenario is named "Fubar" but in the written version we call it "Mubar" - mucked up beyond any recognition. It is time for major surgery, or to close the business down altogether and look for pastures new.

Bottom right is "Fool's Paradise". You are making money despite being uncompetitive but if the market turns down, you will end up in the Fubar. Your priority is to enhance your competitiveness before the market goes sour.

Top left is "Grindstone". You are fitter than the rest and keeping your head above water, but the market is tough. This is the moment to go back to basics in running your business, while exploring new niches that might take you to the right of the gameboard.

Top right is "Gold Medal", where we all want to be - winning the game. But the challenge is to retain the commitment and innovation to stay there, because complacency will lead you down into "Fool's Paradise".

Now be absolutely honest. Where is your business currently on the gameboard and in which direction is it moving? Drilling down, where would you put your individual business units and even individual products? What strategic options (changing the scope of your market) and tactical options (improving your performance) should you be exercising right now?

It is worth a try answering these questions during the economic equivalent of an ice age. Darwinomics is the rule of the game if you want to survive in the long term.

Send your comments to Clem

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