Trial-Error Duo & Modern Day Strategy.

Effective planning is rare in modern day organizations. We are blinder than we think. In this complex state of affairs, trial and error is the way to go! Variation, survivability and then selection is the mantra for modern day strategists. We seek excellence by repeated trial and errors, every single day.

What if I say, the biological extinctions and corporate extinctions share that special signature? And that we can now predict Oh yes, indeed. A compelling clue from Paul Ormerod, a widely read iconoclast from Lancashire, Northern England; currently visiting professor at UCL after his studies on fossil records and corporate extinctions across the globe.

Paul was reviewing all the fossil records over 550 million years — including mass extinctions that made us think of death of dinosaurs trivial for a long time. His study revealed a clear pattern; an indication of hidden relationship between the scale of extinction event and how often such events occur. He found that if extinction event is twice as severe, it was four times rare. If it was three times severe then it was nine times rare! Each extinction landscapes had eras which had few extinctions or none at all as a common factor.

Though we look at biological evolution evolution as an unpredictable blind process; the response to external stimuli resulting in survival of the fittest (Darwin - Theory of Natural Selection), which is later transferred over generations through genes and sexual reproduction. Paul could bring in a mathematical model which actually could predict with great clarity the occurrence of events and extent of biological evolution.

Paul decided to study the statistics work of Leslie Hannah, professor of business history at LSE and a PhD from University of Oxford on corporate extinctions — data on corporate titans, their growth and death; comparing it with biological data (half a billion years old). Though the timescales where different, relationship between size and frequency of an extinction event proved to be exactly the same. Ormerod was amused to see the connection, he turned to a larger database of US companies, sector by sector, state by state. He found the exact same results. He went further ahead to look at data of eight other rich countries on the planet, derived at the very same results.

Though it doesn’t prove that economy is an evolutionary environment and modern corporate strategies evolve through trial & error, rather than successful planning — it offers a great hint, that effective planning is rare in modern economy. We are blinder than we think! In a complex changeable world, trial and error processes are quintessential. But are we equipped and willing to go through this challenging process of making mistakes and learning from them? Who would want a company try out new strategies, fail in it completely; take up the learnings and devise a better one?

The Irony In Politics and Life. When it comes to politics or life, though we tend to mix and match leaders, we tend to give our support to the ones with impeccable track record, iron fists or the one who made no mistakes. The first British woman PM, Margaret Thatcher declared — ‘You turn if you want to, the lady is not for turning’. The Tzarist regime and later Stalin, Lenin of USSR did a great deal as powerful leader, without moving an inch from their decisions and course. Whether we like it or not trial and error is a great process to solve problems, while expert leadership isn’t.

We will have to make uncomfortable number of mistakes and make it a point to learn from them; rather than deny they ever happened or cover them up, even to ourselves! Variation, survivability and then selection is the way forward in this complex state of affairs.