Darwin, Evolution and Competitiveness

In honor of Darwin’s 200th birthday today, I thought I’d post a work-in-progress sneaky-peak snippet from the book I’m working on :)

I’ve been looking at, amongst other things, the topic of competitiveness, and how the bar for adequacy vs. excellence shifts per business category and over time. Coincidentally, a book that was recently listed in Strategy + Businesses Best Business Books of 2008, The Red Queen Among Organizations: How Competition Evolves, deals with just this topic. Apparently a good, but academic, read.

The ability of companies to innovate has become more widespread. Even if you think your company is on the cutting edge of bringing innovation to market, chances are your competitors are closing the gap more rapidly than you might believe. It is getting harder to stand head and shoulders above the crowd when it comes to innovation.

Stephen Jay Gould, the late evolutionary biologist, had a strong interest in how complex systems change over time as different species compete with one another. He was also a rabid baseball fan and he examined the history of the sport as an analogy to how natural systems evolve and improve. One question he puzzled over was why we don’t see batting averages above 0.400 anymore. Through statistical analysis he ruled out external factors such as rule changes, improvements in equipment, alterations in league play and season structure. He also ruled out that batters got worse over time (just the opposite — they are better). So what is causing the drop in overall batting averages?

Gould concluded that there has been an overall improvement in play that has narrowed the gap between the very best and the average players. Back in the early days of baseball the naturally gifted players who could “hit ‘em where they ain’t” (as Wee Willie Keeler put it while accruing a 0.432 average in 1897) had a significant advantage over less naturally skilled players. If one were to plot the players on a bellcurve, as Gould did, there would be a small little tip to right side of the bell (where the best players reside) and a big fat middle for the more average players that slopes gradually to the left for the worse players.

Today that bell curve has shifted dramatically to the right, pushing up against the limits of the human body’s mechanical capabilities. The reason for this, as Gould explained, is because “Slowly, by long distillation of experience, players moved toward optimal methods of positioning, fielding, pitching, and batting — and variation inevitably declined.” In other words, the gap between the average and the best got smaller, and the gap between the worst and the average also reduced. That is, everyone got better, and the best are now barely better than the rest.

Gould argued that this is a generalized property of complex systems.

“I have formulated the argument parochially in the terms and personnel of baseball. But I feel confident that I am describing a general property of systems composed of individual units competing with one another under stable rules and for prizes of victory…. As the system nears [its] narrow pinnacle, variation must decrease — for only the very best can now enter, while their predecessors have slowly, by trial and error, discovered better procedures that now cannot be substantially improved. When someone discovers a truly superior way, everyone else copies and variation diminishes.”

And indeed we find much the same situation in business. It used to be that companies who were “naturally gifted” at innovation, like a natural athlete, had a leg up on their competition. They could stay ahead and out-maneuver their competition due to their innate abilities. In the early days of a new category, this can still be true for a limited time. But the performance of innovation-gifted companies forces the competition to work harder, to learn better how to compensate for their relative lack of natural innovation abilities.

Gradually the overall level of innovative skill in a given market rises, pulled along by the natural talents of some and pushed by the hard work of others. Articles and books are written, conferences held, competing products inspected, employees are exchanged, best practices exposed, supply chains are shared, and knowledge circulates around. As innovation has been identified as a key competitive advantage more attention has been focused on it and companies have worked harder to improve it. Not every company is as good at innovation as it wants or needs to be, of course, but the overall level of innovation has risen so that previously lackluster companies have narrowed the gap with naturally innovative companies.