Companies as living organizations

Just as a living organism has to monitor its interface with its environment in order to survive, a successful business must adapt and sometimes even reinvent itself to make its products and services relevant to the ever-changing marketplace. This adaptation is not an easy matter, as it can be costly to reorganize, introduce a new product and update services. Consumer demand can change rapidly, especially if there is the entry of a new product or service that is technologically superior. In a global marketplace where competitors will eventually emerge despite more challenging barriers to entry, companies are forced to invest in their people, technology, and sales practices to stay competitive and prosper.

Like an organization, a company’s departments, employees, stakeholders, and service providers must work in synergy for the whole, and there is a common approach to making these departmental structures and processes more effective by applying continuous business improvement strategies. It is a Darwinian view of business to survive in an ever-changing global economy with emerging competitors, but it stands to reason that successful companies must continually study the competitive landscape and learn how to adapt their practices in order to survive.

Growth is required for a company to prosper and demonstrate value to its employees and owners. When a company is not performing well showing reduced profits or revenue, its weaknesses are exposed and as an organism, it must change its organizational shape and size in order to revive and become stronger. Diagnosing the reasons for your weakness or dysfunction may indicate serious internal problems rather than just external environmental conditions. Unlike an organism with limited survival instincts, poorly performing companies have many options to reverse their deteriorating situation: you can change your leadership, organizational structure, and seek other radical solutions using a host of expert consultants to improve.

The metaphor of the IT email system that functions similarly to the nervous system of a living organism is an approach to understanding the organizational elements and structure of a business. IT responsibilities have expanded significantly over the decades, and it is often touted as a means of turning around a failing business. IT now manages both the telecommunications and the data network, as well as offering specialty applications and robust enterprise-based integrated systems to control and manage the company’s core business output. IT has also become the second or third most expensive cost center compared to staffing and real estate costs due to the critical importance of improving productivity. New technologies also offer a means to fix problems, inefficiencies and improve operations, but many companies also find that IT conversion is sometimes disruptive and costly if not carefully managed.

The analogy of a corporate organization would position the Board of Directors, the CEO, and their C-Suite team, including the CIO, as the brains that provide leadership and strategic direction to the IT department and the business as a whole. The brain of a business is not limited to just five senses, as it can create sophisticated reports on the environment, the inner workings of the business, and the relative competencies of its various departments, as metrics measure how well each is performing. However, even with research and a plethora of reports, any business as an agency can experience unexpected shocks, discomfort, fear, and even illness. In essence, a company is a group of human beings with different skills, attitudes, and even goals. The competitive drive of the individual must be harnessed to align with the united goals and strategies of the company. Even a company with a long history of success will face catastrophe if its leadership or brain is unable to identify and adapt to changing conditions. The effective C-Suite takes the company in certain directions and makes its products and services in demand even in changing conditions by deploying new pricing and marketing strategies.

Extending our metaphor, the employee workforce operates as various cells organized into various vital organs that have to work in sync with the other departments for the corporation to prosper. Recent business failures show a tendency for companies to respond too slowly to change and there is a common disease of departments becoming silos without proper communication of critical information.
In the case of Kodak’s demise, for example, the failure or terminal illness was a combination of poor planning, timid corporate leadership, and a little arrogance about its business. To think that the business model that worked so well in film processing could be duplicated in a digital format was a serious misjudgment about how quickly a new technology could be adopted, especially when cost and ease of use drastically improved. New technologies such as smartphones offered the consumer a revolutionary approach to photography. When the competitor had the power and global reach of Apple, the impact on Kodak was terminal.

Another case of business failing due to inability to adapt includes many financial firms that relied on subprime lending as a means of increasing their loan volume and profits with seemingly minimal risk due to secondary markets for selling mortgages. Failure to anticipate falling home values ​​and a rise in loan delinquencies as new loans became unavailable led to the destruction of several major financial firms such as Bear-Sterns, Countrywide Financial, Lehman Bros. and various banks and mortgage lenders.

The real estate and facilities department provides the basic skeleton for the business by creating a work space plus respiratory systems to allow staff to work in a safe and secure indoor environment. Customer-facing locations designed to function efficiently and deliver a positive brand experience are additional interfaces to the demand side of the environment. Some companies like Amazon brought innovative solutions into their structure by avoiding brick and mortar costs and linking directly to consumers through the internet channel. Each company develops its own unique structure and geographic footprint in search of some competitive advantage.

Sales support a company like food provides energy to the body. Without effective sales performance, a company is doomed, so it’s no wonder companies are so focused on their sales practices and bottom line. Sales activity penetrates the outside environment through various channels and the use of advertising, sales calls, meetings, and customer relationships, building new customers and nurturing existing customers.

The challenges for a living organism are sometimes surprisingly similar to those for a business. A sudden environmental change, such as a flood, fire or earthquake, can bring an unprepared company to its knees. The tragedy of the earthquake and tsunami in Japan and the floods in Thailand demonstrate how the physical environment remains critical to running business, as many companies have learned to build elaborate supply chains. Managing business continuity and setting up disaster plans is common business practice, but few companies seem to manage risk effectively.

Atrophy in its operations due to poorly coordinated service providers and inadequate risk management procedures can also wreak havoc on a company’s reputation, as the BP oil disaster in the Gulf of Mexico demonstrates. Today’s instant communication to the public of a serious problem, whether it be an oil spill, car safety issues, or contaminated food or medicine, must be handled quickly by the executive leadership team or the impact can be devastating. Leadership needs to respond quickly and professionally to mitigate the reputational damage of a product recall or potential liability event.

The analogy of a company acting as a living organism provides a framework for understanding how companies organize themselves to manage risk and how they can manage the changing competitive environment. The core of any successful business is your vigilance in managing risk. A bit of paranoia is probably a necessary and positive attribute in the C-Suite. Nothing is more dangerous than arrogance, complacency, or the acceptance of a culture that eschews dissent and innovation. As change continues to accelerate in the 21st century, successful companies will embrace it and create new tools to measure and manage it.

The failure or success of any business is unpredictable. The rapidly changing dynamics of global markets and new technologies make the challenges of survival in the 21st century difficult to forecast. The ability for new competitors to emerge is the reason why a company’s strategic advantages can deteriorate so quickly. Noted economist Joseph Schumpeter would call business failures examples of “creative destruction,” as weakened companies were taken over by stronger competitors or dissolved by bankruptcy or outright closure. Such events are the darker side of capitalism but a necessity for a free enterprise system. It rewards those companies with financial strength, productivity and economic innovation. Those companies that cannot compete are eliminated from the market and will perish like a living organism.

The difference in how business operates from biology is the fact that even the sickest and most dying organizations can be resurrected through bankruptcy protection and the intervention of another company to save it. The fascinating nature of business is that it mirrors life in many ways, especially in its survival instinct. Considering that all companies are made up of and run by people, it is not surprising that businesses do reflect the basic characteristics of life.