Darwin’s principle of “survival of the fittest” is in full effect in the corporate world.
Over the years, many companies, especially technology firms, have risen to great heights only to fall to great depths.
As Darwin’s theory implies, when change swept through their industries, these once great firms couldn’t keep pace and eventually disappeared, either to be gobbled up by more powerful foes, to sink into oblivion as a shell of their former selves, or to become defunct.
Keeping Busy
Podcast: Listen to the entire interview (24:08 minutes).
Irving Wladawsky-Berger makes this observation in his blog, and in an interview with the ECT News Network.
Wladawsky-Berger is the chairman emeritus of the IBM Academy of Technology. He is also a strategic technology advisor to Citigroup, and a professor at the Massachusetts Institute of Technology.
In his interview, Wladawsky-Berger cites former tech heavyweights such as Digital Equipment, Compaq and Silicon Graphics as great examples of corporate Darwinism. DEC and Compaq were absorbed by other firms, and today, Silicon Graphics is merely a shell of its “Jurassic Park” heyday.
At the heart of it all is the lack of innovation, according to Wladawsky-Berger. Sustained innovation is the key to maintaining a competitive edge and corporate relevance, he says.
Smart Planet Initiative
He also discusses the newly announced Smart Planet Initiative, spearheaded by IBM. This initiative will utilize technology to help solve real-world challenges related to energy, transportation and other areas, Wladawsky-Berger said.
One example he cites includes the use of mobile technology in San Francisco that alerts drivers to available parking spaces.
Finally, Wladawsky-Berger gives his thoughts on the fast emerging tech sector called “cloud computing.” Among others, he sees Google establishing a leadership position in the cloud computing category.
Here are some excerpts of the interview:
E-Commerce Times: I’d like to start off with a blog post you recently wrote about the “Darwin Effect” in corporations, and I think this is particularly apropos in terms of what’s happening in the automobile industry and those companies being in trouble. Can you just tell the audience what you mean by the “Darwin Effect” in corporations?
Irving Wladawsky-Berger:
Yeah, absolutely. By the “Darwin Effect,” I really mean that if a company doesn’t embrace innovation at all levels, both in the technologies and products it uses and in the way it manages itself in the best way possible, it won’t be able to survive, and the marketplace is so competitive and it’s such a jungle out there that if the company falls behind because it cannot adapt to the new environment, it won’t be able to make it. I think of that in terms of Darwinian evolution. And Blake, you see the evolution in action, including a mass extinction. It’s not pretty to say, but you’ve got whole industries being under siege because there is so much change and those companies that are not able to adapt to the change are not making it. What’s amazing is that many of them are once-powerful companies, and the marketplace doesn’t care how powerful you once were — if you cannot make it, you cannot make it.
ECT: What are some good examples of these once-powerful companies that have either gone extinct or are teetering on the brink of extinction right now?
Wladawsky-Berger:
It is all really apparent in the IT industry, the information technology industry — and that’s the industry I know best, having been there for a long time — Digital Equipment was one of the most successful companies, they invented a whole category of minicomputers. They were riding really high in the late 1980s, and Blake, they are gone. They don’t exist anymore.
Compaq was once the most successful PC company in the industry for many years, they were very successful and now they’re gone, merged into HP. I still remember when “Jurassic Park” came out in the early ’90s, they used Silicon Graphics workstations to do a lot of the special effects. Silicon Graphics is still there, but it’s a shadow of what it once was. And the list goes on and on.
A really timely example is the financial industry. Look at Lehman, look at Citigroup — it’s a company I’m consulting for — it’s been to the brink. Hopefully, Citigroup will be fine and make it and be able to become a leading bank and continue to be so. You see Bear Stearns disappearing. The number of banks that are no longer here is very large, and that number will keep growing. Then, look at the media industry and look at the big changes that are going on in the media industry. So I think that there is really no industry that can claim to be isolated from this big survival imperative that every business needs to embrace in order to survive and move into the future.
ECT: There’s something that comes to mind for me in terms of two reasons why companies no longer exist. One is because they are bought out by — or merge with — another company and their brand name ceases to exist, or they simply go out of business for whatever reason. Do you make a distinction in terms of the Darwin Effect between those two situations?
Wladawsky-Berger:
Not really, although I can see why maybe one should, because often the reason — for example, Compaq didn’t go out of business, but the fact that they merged with HP and essentially disappeared is because they weren’t doing well. Often, the reason a company gets absorbed is a way of at least their assets continuing to survive. I’m sure there are counter-examples when the company was thriving and then got absorbed, and I’m sure those exist. For the most part, once a company gets absorbed — for the most part — it’s because it is deemed that it can no longer survive under its own power and then it’s best for its assets to now be integrated into other companies.
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I worked with and for Irving in the mid-nineties at IBM. A few years earlier, IBM was on the brink of extinction because of several executives’ arrogance and stupidity. Irving’s leadership was key in re-establishing innovation as part of the IBM framework.
At the time, much of the innovation from IBM Research and the Academic Information Systems special business unit was being totally ignored by the self-centered executives. When Lou Gerstner became CEO, he recognized the importance of innovation and Irving was asked to build an Internet development organization using these "hidden" resources.
If Irving and his team had not succeeded, IMHO, IBM would also have fallen prey to Darwin’s principle.
I haven’t listened to the whole interview and don’t know the extent to which Irving might have discussed IBM’s situation. If not, I think the interviewer should have delved into what was happening to IBM at that time and how the leadership of Irving and others enabled the re-emergence of innovation at IBM. Doing so would give other companies a real example of how to turn around failing businesses.