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Darwin's Medicine blog

Professor Brian D Smith is an authority on the pharmaceutical industry and works at SDA Bocconi University and Hertfordshire Business School.

Edging Evolution

You don’t have to wait for your business to evolve

The English language is a wonderful thing. Almost every word has multiple meanings and carries subtle inferences. For example, in everyday usage the word evolution implies a glacial slowness and is an antonym of revolution.

I was reminded of this at a recent conference when I heard a pharma industry executive say that their business ‘couldn’t wait for evolution’. To an evolutionary scientist, this view is dangerously naïve, both ignorant of how organisational change happens and excluding opportunities to accelerate change.

Evolutionary geeks like me use the E word in a way that has important differences from its usage by less nerdy people. We don’t mean any form of gradual change, we specifically mean change that occurs via the three-step mechanism identified by Darwin. As he found, evolution begins with variation, then selection, then replication. Every useful change begins with a difference from the norm that is favoured by the situation and then spreads. Darwin was interested in how this process led to change in phenotypic traits like the beaks of Galapagos finches. In my research, I’m interested in how it leads to new competitive strategies, organisational behaviours and business models in the life sciences industry.

This has very real and important practical implications, especially for those who, like the person I heard at the conference, want to hasten change in their business. Each of the three steps offers the chance to change more efficiently and effectively than competitors who are not guided by Darwinian concepts.

Start with variation

The speed of organisational evolution depends on the rate of variation of organisational routines, so encouraging new ways of doing things is the starting point for rapid organisational change. This might seem obvious but typical practice in most companies is to reduce variation by means of standard operating procedures,copying best practice and cultural norms. There is a raft of techniques – from applying artificial constraints on budgets to introducing new people – that are shown to encourage variation in long-established ways of doing things.

But in most companies, the default position to drive change is to install a standardised programme or process of some kind, an approach that often suppresses variation and so slows evolution.

Pick the most impactful changes

If you are lucky enough to have encouraged a lot of variation in your organisation, the next challenge is to pick the changes that
have the most beneficial business impact. This is where an appreciation of the selection mechanism is useful. Many companies are seduced by variations that are fashionable, easy to do or have been ‘spun’ by consultants. Darwin provides a more scientific view: the variations to back are the ones that are most favoured by the business environment. For example, in today’s market, changes in the business model that make use of data to create customer-perceived value are favoured.

By contrast, changes that create only marginal and narrow clinical advantage are not. Value created beyond the pill, such as companion diagnostics and devices, are good examples of environmental selection, while me-too products that are not granted market access illustrate the market disfavouring variation. By considering which variations in strategy are favoured by the market environment, the wheat can be sorted from the chaff more quickly.

Having found variations from current practice favoured in the market environment, the final step in accelerating evolution is
to hasten their propagation through the organisation. In biology, sex is the acceleration mechanism because it enables successful variations to be acquired from the outside as it were. Many life sciences businesses, however, adopt the opposite approach and reject variations unless they come from their peers. This conservatism is the analogue of having sex with your cousins; it renders evolution both less effective and less efficient.

It is better to scan your own organisation widely for variations that are favoured, then encourage their adoption. The adoption of quality systems from the automobile industry is the textbook example of this. The failure of endless industry fads – from patient-centricity to agility – to become embedded is illustrative of variations that fail to replicate well.

Understanding Darwin’s variation, selection, replication mechanism is immensely powerful. It allows organisations to accelerate their own evolution. And remember that, evolutionary advantage doesn’t require dramatic differences.

All it takes is to be marginally, but significantly, better adapted to that environment than your rivals. The edge that can be gained from fostering variation, selecting and encouraging replication, is more than enough to make a difference. Evolution of your business model doesn’t have to be synonymous with slow change. You don’t have to wait for it to happen, you can make it happen.

Professor Brian D Smith is an expert on the evolution of the life sciences industry. He welcomes comments and questions at brian. smith@pragmedic.com

6th August 2019

From: Healthcare

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