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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.

Microfoundations matter

If you want to change in 2023, sweat the small stuff


The new year always fills me with hope and ambition. If you’re like me, you probably enter 2023 with plans to revitalise and change how you make an impact in your company and on the lives of patients.

It’s natural to think in terms of grand plans and big goals. But when I study how change really happens in organisations, I find that success correlates with, as the saying goes, ‘sweating the small stuff’. Let me start, as I like to do, with a parallel from evolutionary biology before I get on to how these ideas should influence your plans for 2023.

Small change, big change
In business, we’re fond of talking about transformational change, but biology is better at it than businesses are. As humans, we are a great example. With our big brains, speech and cultures, we can invent CRISPR and send satellites out of the solar system. Yet a moment ago, in evolutionary terms, we were living in trees picking fleas off each other. That’s real transformational change. How did that happen? Well, it might sound flippant but it wasn’t the result of a new year’s resolution or a grand declaration of intent. It happened through the evolutionary change in our DNA. And the amazing thing is that those changes weren’t even large; we still share most of our DNA with our pre-human ancestors. But those limited changes were important changes. They enabled an increase in brain size, walking upright and speech, for example. The big changes we see in biological phenotypes are often the result of relatively small, but highly significant, changes in genotypes. Your genome and that of a chimp are 96% the same but you’re quite different from your primate cousins.

Microfoundations matter
What does biology’s evolutionary ability teach us about transforming our businesses? The general lesson is that if you know what to change, you don’t need to change much but those few, meaningful changes must be at a fundamental level. If you want to transform your firm’s phenotypic traits, you need to tweak the organisational equivalent of your firm’s genome. In the jargon of my academic research, you need to modify your routineome by engineering its microfoundations. In the same way as the base pair sequence is what matters in genetic engineering, in organisational transformation it’s the microfoundations that matter.

Origins of excellence
A firm’s ability to excel at anything is the result of an effective process or set of processes. Marketing excellence, for example, is partly the result of an effective segmentation process. But every effective process is made up of many small routines. Effective segmentation, for example, involves routines for defining markets, differentiating between hygiene and motivating needs and understanding the heterogeneity of motivating needs. (By the way, if this is new to you then ask me for my PME article ‘Superior Segmentation’). So strong capabilities flow from strong processes made up of strong routines. And it’s the microfoundations that make routines strong.

When I drill down into what makes companies effective, I find four microfoundations. First, attributes of the individuals. For example, the marketers’ knowledge of segmentation theory. Second, the group’s processes. For example, how it applies the individuals’ knowledge. Third, the team structure. For example, how functional groups are connected to each other. Fourth, conflict management. For example, how differences between groups are used constructively. These four small but fundamental things combine to make a difference to a firm’s capabilities. When I compare strong marketing teams with weak ones, for example, it’s not headcount or resourcing or even experience that are different. It’s these four microfoundations. And, just like you and your chimp cousins, it takes only minor differences to make a major difference in capability. It was this correspondence between genetic sequences and microfoundation differences that led me to label them the way I did in my book ‘Darwin’s Medicine’. Attributes, Group Processes, Team Structures and Conflict Management can be abbreviated to AGTC.

Sweating the small stuff
So, as you enter 2023 full of ambition to change things and make a difference, please resist the temptation to begin with big new initiatives. Instead, begin by thinking carefully about what change you want to happen and what that implies for the capabilities you must excel in. Then try to parse which processes must be improved to enable those capabilities and which routines must be optimised to enable those processes. Finally, identify the microfoundations – individual attributes, the group processes, the team structures and the conflict management mechanisms – that you need to tweak to make your most significant routines work better. The microfoundational changes you need will probably be quite small and consequently more likely to be achieved in a reasonable time with limited resources. But, like the small genetic changes that make you more intelligent than your primate cousins, these small changes to your firm’s microfoundations – the analogue of its base-pair sequence – will make a big difference to your 2023.

Professor Brian D Smith works at SDA Bocconi and the University of Hertfordshire. He is a world-recognised authority on the evolution of the life sciences industry and welcomes questions at

31st January 2023

From: Healthcare


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