How to Stay Ahead When the Rules Change

Why do companies so often fail to adapt? ... no shortage of ways ... But ... firms need to recognize the need for change ... organizations tend to operate ... blind momentum... why are they slow to change course? ...

very difficult to study how companies adapt ... need both a large sample of firms and a reliable way of quantifying their choices.... professional multiplayer games ... eSports... provide an almost ideal natural laboratory... all the elements of business competition are there ... teams are high-stakes, profit-seeking ... strategy and tight coordination ... sudden and unforeseen changes occur ... game updates ... offered deep visibility ... in the aggregate [and] ... individual behavior...

something in ... structure of organizations ... shapes how the individuals inside see the world... worldview... can make them slow to adapt...

organisations ... divide labor by function... to minimize burden of coordinating ... focus on our own part of the puzzle and develop specialized skills ... form mental maps ... filter out ... system-level complexity... trouble comes when the world changes. Shocks... ripple throughout ... but it’s less likely that anyone will notice... consider the need for global changes ... [what] makes a firm effective in stable times — a sharp division of labor — can make it ineffective in times of disruption...

revisions to the game’s code ... directly altered the viability of certain strategies ... would teams revise their game plan, or ... continue ... just swap in stronger heroes? Systemic change or business as usual with different personnel? ...

with an algorithm from bioinformatics (used to analyze DNA sequences... most teams responded only by switching heroes ... after a lag of several weeks did some begin to revise their strategies... immediately after a change, teams were less innovative than in stable periods... refocus on doing what they already know ... small, nimble teams ... same inertia that big corporations exhibit ... [not] bureaucracy or turf wars or fear of change... it was a failure to recognize the full, systemic implications of external change... firms fail to adapt when they focus on specific tasks at the expense of system-wide behavior ...

could strong leaders guide their organization’s adaptation? ... in-game signals, called “pings,”... how much leaders involved other members in team decisions... some teams... hub-and-spoke ... others... more even ... players ... mutually adjusting to each other ... top-down directions didn’t help very much ... Teams with flatter structures... more likely to recognize the need to look for a new strategy ... only when updates had an obvious and direct system-wide effect... teams with dominant leaders adapt faster...

suggest that leaders ... faced with change, should consider tapping more into their employees’ knowledge...

when teams introduced a new strategy ... more likely to lose that particular game... a longer view... those innovating teams eventually outperformed the others ... a fascinating wrinkle: ... when the effects of a change are evident, everyone adapts and no one gains an edge. When they’re not evident, being the first to figure them out can deliver a competitive advantage... change as an opportunity, especially when [not] immediately obvious