Plan B Matters Most
The Rooney Rule is beautiful. It is perfectly adapted to its purpose. Back in 2002, there were just two black head coaches from thirty two teams in the whole National Football League. This was despite more than 70% of the players in the NFL being black.
If the league wanted to change the situation, it would have been impossible to insist that a certain percentage of head coaches were black because specific teams would have been forced to choose black candidates. It would not have been fair because it would have only applied to a certain number of teams, not to everyone.
If the league wanted to change the situation only through passively encouraging a change in perceptions with poster campaigns and training programmes, it might have never happened because of the deep equilibrium that was keeping things as they were. White owners know white players who come to mind when a vacancy arises. Owners don’t have to be consciously racist to not appoint players they don’t think of or don’t know. There was a cultural and processual reason for high numbers of white coaches.
There were too few black candidates getting interviews to change perceptions. If you never interview, or rarely interview, a candidate from outside your own experience you’re unlikely to hire one. Even if qualified. If candidates aren’t being interviewed then they are less likely to apply for the positions. It is a self-perpetuating cycle. Self-perpetuating cycles require intervention, some kind of breakthrough change of the pattern so it is allowed to gradually lose its negative impact. They need a plan B.
The beauty of the Rooney Rule is that it only insists that black candidates are interviewed. The owner gets to hire whoever he, or she, wants. The rule only ensures that the club has to think about non-white candidates. The rule disturbs the deep equilibrium that kept things the way there were. It introduces a simple, re-designed part of the process which, in turn, alters perceptions and increases opportunities.
By 2011, the number of non-white coaches had risen to eight. That’s still only 25% of the coaching position but there are 400% more coaches than before the rule change. Just as importantly, there has been a year on year increase in the number of minority and female executives. The recognition that there is a problem has been matched with action to adapt the situation in a way that minimised friction and maximised progress.
Adaptability doesn’t always kick in automatically; it must often be prompted. It’s easy enough for adaptation to be screwed up if the need to adapt is not recognised, if the nature of the adaptation is not understood, or if the action to adapt is not taken. At any of these points, effective adaptation is stopped.
It follows that organizations need to find ways of increasing recognition of need to adapt, understanding of action needed, and the action that is required. The design of these interventions should be as elegantly simple as possible, because if the intervention is too complicated it will slow down the adaptability is seeks to speed up. The treatment may be just as damaging as the disease it attempts to cure.
Sometimes there are unintended consequences from well-meaning changes. Changes to stop one problem may increase those problems in the future. This can happen when problems that flow from a deep flaw in the system are repaired superficially. They give the impression of being fixed. They may fool many into believing that all is well; while under the surface problem continue to develop. The consequences of the problem and the cause of the problem get worse because no new attempts are made to adapt the system. Thinking anything is fixed forever prevents early recognition of new problems.
Equally, a change may make the situation worse because it qualifies as a maladaptation. It is change that is worse suited to the demands of the environment or events than the previous version of the human system. These changes do not merely hide the problem, letting it get worse hidden in the background; these changes either magnify the original problem or add new problems. They may also represent a worsening of ability to recognise, understand or act in effective ways that adapt to the events or environment.
The Easter Islanders cut down all the trees. They became the poster-children of self-inflicted environmental destruction; a reminder that if they could destroy the basis of their prosperity, so could any civilisation. A society descended from 40 Polynesian forebears capable of navigating the oceans. A community with the technology to build at least 887 massive stone statues including one unfinished example nearly 70ft high with a weight of 270 tons. They had independently developed their own form of writing, rongorongo, one of only four independent inventions of written communication in history. They depending on hunting birds in the palm tree forest. How could they have destroyed the forest?
Competing explanations exist for the disappearance of the rain forest. Scientists tend to agree that the deforestation happened over a period of 200 years but there are major differences of opinion over when this happened. They are agreed that the around eight major bird species became extinct as a result. It is generally accepted that the islanders had a food economy based on hunter-gathering in the forest and through fishing.
Differences appear over the lessons to be learned. For most, it is a haunting story of extreme maladaptation, with the islanders causing their own problems. For some, it is a heroic story of resourceful adaptation, with the islanders adapting successfully even faced with major environmental challenges. The truth seems to be a mixture of both.
The story of the Rapa Nui begins with the great Polynesian Pacific Ocean exploration force around 700AD. The consensus based on DNA evidence is that groups from Polynesia to the west started send out exploration groups to find new lands to colonise. Some succeeded, while others failed and abandoned their islands after two or three hundred years. The group of between 30 to 100 people who arrived on Easter Island arrived about 700AD based on carbon dating of artefacts found there.
It’s an isolated place. The nearest inhabited land is Pitcairn Island, some 1,200 miles towards Australia. The closest mainland is the coast of Chile, 2,300 miles away or Tahiti, another 2500 miles southeast. Once you’re there, your options become limited. Finding raw materials, foraging for food or exchanging new ideas with other groups is difficult.
The group of men, women and possibly children benefited from abundant bird life but were perhaps unaware of the fragility of their rain forest. Diamond points out the island qualified in eight of nine characteristics that make the death of a forest more likely. Its latitude is high, plant feeding rainfall and soil enriching dust fall from Asia are both low, its relatively cold, and is the second most isolated. His statistical modelling suggests that Easter, Nihoa, and Necker would be the most deforested, and that’s what happened.
In their two giant canoes, the Easter Islanders landed on one of the most fragile environments in the pacific islands. They were not to know that the domestic rats they brought with them would eat destroy the roots of the palm trees. They cut down trees for wood and to clear land for crops not realising that they would struggle to grow back. Yet they still cut when they should have resisted the urge.
Increasingly elaborate rituals used wood to transport the huge statues and the environment could not support the level of resources needed by their unlimited ambition. They produced more statues than they ever had wood enough to transport No-one was able to acknowledge the need to adapt and understand what was necessary to do so. They could have slowed down production of statues, but in a competitive environment such considerations were ignored. The invisible hand cut down every tree.
Some kind of irrational exuberance, an obsession with grand gestures led them to carve the sculptures – moai - in the likeness of their god-like chiefs. With their eyes turned to the sky and their backs to the sea protecting the people, they diverted time and resources more important areas of adaptation. It didn’t happen on other islands colonised by Polynesians. Later, the statues appear to have been regretted by the Easter Islanders who knocked over every single sculpture in a display of frustration.
Shortage of food, and the realisation of the consequences of their failure to adapt, contributed to internal conflict. This included the making of weapons, and violence between different groups. It isn’t clear to what extent they fought before the deforestation but the population dwindled from around 15,000 to fewer than 3,000 in about a century. Twenty one species of trees and all species of land birds were extinct.
As a result of fighting over resources and loss of population, the Island Islanders went through a process of adaptation which was painful but did not lead to extinction. They appear to have avoided final failure for their society by deliberately adapting. They turned to farming for food production and may have fertilised their soil because by the time the Dutch arrived in 1722, the soil was rich and under cultivation.
It isn’t clear whether the bird cult which developed on the island was a contributing factor to the problem, since it handed the winner of a swimming and climbing race control over resource distribution. Or was it the way the society adapted by moving away from a strict hierarchy based on a divine right of kings, to one based on shared power through a form of meritocracy. It was a campaign race for island leadership.
Hostility towards European ships slowed down the colonisation of the island. The Dutch visited for a week in 1722. The Spanish visited in 1770 taking symbolic possession on behalf of King Charles III by erecting three wooden crosses. The island was left pretty much alone until 1862 when slave traders from Peru captured around 1500 of its people including the son of the chief. They were forced to return their slaves a year later but most of them had already died. The remainder were dumped back on the island with some carrying smallpox which reduced the population further.
The population converted to Christianity in 1866 but the first missionary brought with him tuberculosis which killed another 400 people. Then a French mariner named Jean-Baptise Dutrou-Bonier arrived. He married a local girl by force and appointed her Queen and recruited a faction of the islanders who kept him in violent power for four years. He bought almost all of the land but most people left for Tahiti and Mangareva. By the time he was murdered in 1876 for kidnapping children, there were just 111 people left.
The island became an annex of Chile in 1888 with an agreement signed with survivors who lived in one small area while the rest was rented as a sheep farm until 1953. And finally in 1966, the islanders became full citizens of Chile with full protection of their rights. Since then, they have embraced what could be reconstructed of their ancient culture but have continued the struggle to adapt successfully to the twenty first century.
When I first heard of the Easter Islanders, it was from the crazy expedition of the not-so-crazy adventurer Thor Heyerdahl who had decided to prove that they could have travelled from South America. In his book, the Kon Tiki expedition, he proves settlers could have also travelled from South American. This would explain the existence of the sweet potato and accounts of different skin colours on the island. He built a huge pae-pae raft out of balsa wood, a technology of the era in question, and sailing across the pacific ocean for 101 days and 4,300 miles. And before that he used imagination to create his theory and go beyond what we known.
Thinking beyond what we know is a key benefit of imagination. It allows us to anticipate what cannot be seen and understand what has not yet been discovered. Through applying imagination we are able to question assumptions, and through questioning assumptions we are able to extend what is known.
The basis of critical thinking performs thought experiments to explore the extent to which something may be true or false, and to combine existing knowledge in new, boundary spanning ways. Imagination is used even by those who think there are unimaginative. Without it they could not perceive anything before it happened and be unable to anticipate well enough to do anything. Those particularly imaginatively able can more powerfully see a more complex set of connections, facts and possibilities.
Path dependency is not deterministic. There is room to move outside of the most obvious direction of a path. Even a path that is well worn can be evaded. That’s something heartening to those feel trapped by the limitations of the assumed shape of the future. It can be liberating to see possibilities outside of historic precedent. It’s also a characteristic that can be unexpected, puzzling and unsettling for those who assumed the safety of the path. To see the sparkling future and see it dimmed. This is loss.
Successful adaptation depends not so much on what has happened before but on what can be imagined next. The events of the past provide the present situation yet the present situation is susceptible to the transformation power of perception. Past, present and future are real yet malleable which leaves us able to transcend those constraints that depend on our lack of knowledge for their power.
Netflix is a story of disruptive innovation. They are a living, breathing corporate example of how to adapt ahead of assumed behaviours and then how to crash, and burn in the horrific detail of high definition, super slow-motion spotlight of public scrutiny. The end of the story may never come, but the story so far is instructive. The comparison between their superlative success in strategic adaptation, figuring out the weakness of their competition, and the dangers of a proposed, pre-emptive adaptation is dramatic.
It all started innocently enough. Netflix saw the future and it was video streaming. The day of DVD’s rushed to your door for a subscription fee was the past and it was over. Unfortunately for Netflix, their customers stubbornly refused to see things their way. They kept on signing up for the subscription fees that included DVD delivery. They foolishly believed that they preferred both services, and kept paying for them.
Netflix management, eager to re-educate their customers, decided to stop offering a service that included both DVDs and movie streaming. Instead of being charged $9.99 for unlimited streaming and DVD subscription, customers would have to pay $7.99 for each service separately. The changes were made overnight, with no warning. There were no other options made available, customers could either pay more or go elsewhere. And, given the choice, over 1 million customers cancelled their subscriptions.
Losing one million customers was bad for Netflix. One million customers represent about 4% of their total. Four in every hundred quit the business, and many of those that remained weren’t happy either. Worse, many of the customers who had left were part of the streaming-only group who were annoyed at how the company had acted. The CEOs reaction was to announce they would split the company into two; one for DVDs, the other for online streaming. Stock holders reacted with a 25% fall in share value in just a few hours.
When the Netflix CEO says, “companies rarely die from moving too fast, and they frequently die from moving too slowly” he confuses moving fast with adapting successfully. Speed is not always a virtue. There is no ideal speed of adaptation because adaptation is linked to the match between environment and actions. You can rush changes through impatience rather than urgency, arrogance rather than
It is more accurate to say that companies rarely fail from making the right moves, and they frequently die from making the wrong moves. It is a question of timing rather than of speed, a matter of knows-when rather than know-how. It’s possible to adapt slowly and thrive, or make fast changes that are maladaptive or simply superficial.
Back in 1999, Reed Hastings helped change the world of DVD rentals. He launched the company eighteen months before as a fairly standard pay-per-rental approach that just happened to have an online store not a bricks-and-mortar outlet. The idea was to compete with blockbuster by not having to have traditional overheads.
Things changed when Hastings remembered the irritation of being charged late fees as a customer. His memory prompted the team to adapt their offering. Their flat subscription, unlimited rentals without late fines or shipping fees was an offer that 22 million customers could not refuse. It was also an offer that confused the competition, particularly Blockbuster who spent the next decade trying, and failing, to catch up.
Rewinding back to 1985, it was Blockbuster who had most effectively adapted to the growing demand for movie rentals. Started up in Dallas, Texas by David Cook who applied his expertise in managing large computerised databases to the problem of how best to provide huge choice to customers. He invested $6 million into a warehouse and delivery system that could provide customised stock to individual stores.
Blockbuster caught the attention of Wayne Huizenga who bought the company in 1987 with the intention of expanding as fast and as large as possible. At one point they were opening one store every seventeen hours. Alongside which they aggressively expanded through buying other movie rental stores. They sold the business to Viacom for an eye watering $8.4billion in 1998 but the market was already changing faster and by 2004 they split from their parent company.
Netflix had helped change the market in a way Blockbuster did not understand well enough to respond with effective adaptation. It should have been easy. They should have been able to simply start up a competing service running a little behind Netflix. They already had customers. They already had money. They already had brand recognition. But unfortunately they also had something to protect and ingrained ideas about how to best run a movie rental business. They did nothing.
It took them until 2004 to launch their online DVD rental service and another year to drop late fees to match Netflix. In 2007, the next CEO stopped work on the online service and concentrated on the in store experience because of concerns over profitability but also because he understood retail not the world of web innovation. He didn’t understand the nature of the adaptation required and so decided not to attempt to understand. This was a mistake.
Within three years, the company was delisted from the New York Stock Exchange, and unable to pay interest on over $40 million of bonds. Before the end of 2010, it filed for bankruptcy protection with $900 million in debt. In the time provided by Chapter 11 legislation they had intended to adapt sufficiently to keep all 3300 stores open. However in the end they did not have enough cash. The once proud Blockbuster was sold in an auction for $320 million to Dish Network, the country’s second largest pay TV operator, who kept about 600 stores open. Six hundred where once there were four thousand.
We are talking about movie rentals but the ideas apply to any deliberate adaptation. It is necessary to recognise the need to adapt, understand the specific adaptation required, and then adapt. It’s strange to think a company founded on the basis of a technological shift in movie watching, from cinemas to home videocassettes, could have missed the next big change. This is a reminder that experience does not necessarily lead to insight, understanding or action.
Netflix may triumph, as may Blockbuster. Netflix has over two thirds of the digital movie market in the USA. Their nearest competitor, Comcast has 8% and three rivals direct TV, Times Warner and Apple with 4% of the market. Yet it’s entirely possible to go too fast for your own good, so far ahead of a trend that it impresses you rather than buyers of the product or service. Or, more precisely, to go fast, go arrogant and fail to take your supporters with you. In matters of adaptability, it is always the beginning.
The problem is that is customers know that a deal is bad for them; it is usually also bad for the company. It isn’t planned that way. Netflix thought they could have all the benefits of the changes; increased revenue and a gradual running down of the less profitable service. Moving from two separate services to two separate companies is intended to safeguard the Netflix brand while eventually quitting the Qwickster market. But if customers know this is bad for them, they will quit and then it is bad for both.
Customers can quite easily survive without Netflix. They can buy DVDs or use other services to rent them. They can go back to Blockbuster who immediately ran a campaign highlighting how “Netflix raised prices by 60%”. Many of the 22 million Netflix customers have now been prompted to discover the world of free and paid, legal and illegal, movie streaming. They would not have gone looking for alternatives, but now they will.
Small adaptations, like the Rooney Rule, can have powerful beneficial consequences. Obsession with the superficial, like the immense statues of the Easter Islanders, can dramatically reduce opportunities to thrive. This can place great strain on a group’s ability to adapt. The Rapa Nui survived but have not, so far, regained their former glories. It is the combination of recognition, understanding and action that permits adaptation.
(Draft except from Adaptability by Max Mckeown - All Rights Reserved 2011)
