do you have a survival instinct? leveraging genetic codes to achieve fit in hostile business...

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Do you have a survival instinct? Leveraging geneticcodes to achieve fit in hostile businessenvironments

Thomas Lawton a,*, Tazeeb Rajwani b, Patrick Reinmoeller b

a EMLYON Business School, 23 Avenue Guy de Collongue, 69134 Ecully Cedex, FrancebCranfield University School of Management, Cranfield, Bedford MK43 0AL, UK

1. Coming to terms with hostileenvironments

The hostile environment, defined by natural scien-tists as a set of unstable external conditions, hasbecome a clarion call for business. Consider the

now-defunct Lehman Brothers, not so long ago thefourth largest investment bank in the United States.Lehman Brothers was considered one of Wall Street’sbiggest dealers in fixed-interest trading, and washeavily invested in securities linked to the U.S.sub-prime mortgage market (Schwartz & Bajaj,2007). In 2008 the environment was turning hostile,with investments shunned as high risk. Following thecollapse of Bear Stearns in early 2008, it was notsurprising that confidence in Lehman Brothers took ahit. Spanning the period June to August 2008, thebank made write downs of $700 million as it adjusted

Business Horizons (2012) 55, 81—91

Available online at www.sciencedirect.com

www.elsevier.com/locate/bushor

KEYWORDSHostile environments;Genetic codes;Organizationalcapabilities;Strategic fit;Coping strategies;Strategic adaptation;Biomimesis

Abstract It is too easy to blame market turbulence or unexpected events for acompany’s poor performance; yet, this is frequently the response of managers tocircumstances and activities beyond their immediate control. As a consequence,managers and owners often fail to develop strategies for coping with challenge orcrisis the next time it occurs. The result is that many organizations are doomed to repeatthe same or similar mistakes over and over again in a form of corporate deja vu. To gaininsights regarding how companies can better manage in hostile environments, weconsider the solutions that have evolved in nature over billions of years. We tracenature’s codes for adapting to hostile environments and explore the underlyingcharacteristics of four genetic code types that can help business organizations to offsetthe negative implications of hostility through ensuring strategic fit. We then link the fourgenetic codes most frequently found in nature with organizational capabilities. Whencorrectly identified and leveraged, these capabilities can enable a company to focusattention and resources on how to manage successfully in hostile environments.# 2011 Kelley School of Business, Indiana University. All rights reserved.

* Corresponding author.E-mail addresses: [email protected] (T. Lawton),

[email protected] (T. Rajwani),[email protected] (P. Reinmoeller).

0007-6813/$ — see front matter # 2011 Kelley School of Business, Indiana University. All rights reserved.doi:10.1016/j.bushor.2011.10.002


the value of its investments in residential mortgagesand commercial property to the decline of the marketvalue of such assets. However, this figure soared to$7.8 billion, which resulted in Lehman reporting thelargest net loss in its history. The bank also admittedthat it still had $54 billion of exposure to hard-to-value mortgage-backed securities. With its peers andthe government reluctant to extend a helping hand,Lehman filed for bankruptcy protection in September2008.

This example shows that hostile environmentscan hit companies hard. But could things haveturned out differently for Lehman if the firm pos-sessed an instinctive coping strategy for survivingthe hostility of the U.S. sub-prime mortgage melt-down? By coping strategies, we mean the collec-tive behavioral tools and techniques thatindividuals, animals, and organizations routinelyuse to counteract or conquer adversity and turbu-lence, without actually correcting or removingthe underlying cause. These are strategic in thatthey are about how to survive, and are fundamen-tal to the continued existence of the organism ororganization.

Even without the threat or likelihood of corpo-rate failure, the challenges of senior managersincrease exponentially as they strive to lead theircompanies in business environments characterizedby hostility (Duncan, Yeager, & Rucks, 2011;McGrath & MacMillan, 2009). In a fast paced, inter-connected world, high impact and often improbablepolitical and economic events make hostility thenew default environment. In extreme situations,man-made or natural disasters can threaten thevery survival of any organization in its givenindustry (Duncan et al., 2011). At the very least,hypercompetition–—characterized by intense inter-company rivalry, rapidly evolving markets, andease of entry into new markets (Ilinitch, D’Aveni,& Lewin, 1996)–—has become the norm in most indus-tries. Sustainable competitive advantage is increas-ingly rare and is declining in duration. Consequently,most companies in given industries can at best aspireto temporary advantages (D’Aveni, 1994; Wiggins &Ruefli, 2005), and research indicates that the tempo-rary (volatile) component of competitive advantageis increasing compared with the long-term sustain-able component (D’Aveni, Dagnino, & Smith, 2010;Thomas & D’Aveni, 2009).

The purpose of this article is to look at how animalsdeal with their hostile environments, in order toprovide fresh insights regarding how business man-agers can approach their uncertain environments. Inthese circumstances, how can companies develop theorganizational survival instincts needed to ensurestrategic fit in hostile environments? We understand

strategic fit to mean the appropriateness of a com-pany’s resource base for its given industry andstrategy in terms of its alignment with the environ-mental or organizational threats and opportunitiesfacing the business (Hofer & Schendel, 1978; Zajac,Kraatz, & Bresser, 2000). Lessons from natureoffer insights into the limits of and potential forbusiness management survival strategies (Gavetti,Levinthal, & Rivkin, 2005; Penrose, 1953). Animalscan thrive in environments that are much moredeadly than the marketplaces in which businessesoperate. By examining how animal species deal withhostile environments, we can gain fresh insightsinto the capabilities by which companies codedfor specific industries can help adapt to externalhostility (Clippinger, 1999; Plotkin, 1994; Zimmer,2007). Managers can learn from animals that haveevolved instincts of coping in hostile environmentsover billions of years (Benyus, 1997; Winter, 2004).In other words, managers need to learn whichgenes, or capabilities, they need to switch on andwhich to switch off. We therefore advocate a bionicanalogy between animals and industries to suggestalternative capabilities to achieve or reestablishstrategic fit. Managers can consequently makechoices about how they may better equip theircompanies for business survival.

Nelson and Winter (1982) view organizationalcapabilities as the aptitude of companies to useroutines and resources in changing environments.More precisely, it is the bundling of resources thatbuilds capabilities (Sirmon, Hitt, & Ireland, 2007).The empirical research on the development anddeployment of organizational capabilities concen-trates mainly on specific processes and routinessuch as pricing (Dutta, Zbaracki, & Bergen, 2003)and marketing (Morgan, Zou, Vorhies, & Katsikeas,2003). Although strategic management researchersuse various constructs to define capabilities, thereis consensus that a capability is a distinctive andsuperior way of allocating, coordinating, anddeploying resources (Schreyogg & Kliesch-Eberl,2007). Whilst capabilities are company specific,they share a basic common structure (Teece,2007). The evolution of capabilities (Helfat &Peteraf, 2003; Stinchcombe, 1965)–—similar to aninnovation process that is based on variation, se-lection, and retention–—is triggered by the need toadapt them to achieve fit, even in hostile environ-ments. Looking at capabilities that have evolvedin nature in response to hostile environmentsallows us to explore the lessons that businessenterprises may learn. We then translate theselessons into concepts that can assist managers inchoosing strategies and developing capabilitiesthat facilitate fit.

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2. Leveraging biomimesis inmanagement

Velcro (in its design), passive cooling (in architec-ture), water repellent surfaces (in the lotus effect),and friction reducing sharkskin swimsuits are exam-ples of popular commercial applications based oninsights derived from nature. The systematic ap-proach to exploring and using nature’s solutions iscalled biomimesis, derived from the Greek words for‘life’ (bio) and ‘imitation’ (mimesis). In each of theaforementioned examples, through observation andanalysis of how specific problems are solved innature, an analogy has helped develop a high valuemechanism, property, or process based on a naturalmodel. Developing solutions that have functionali-ties similar to those found in nature, yet with acommercial or social utility, lies at the heart of thebiomimetic method (or biomimicry). Already widelyapplied in design, engineering, and the sciences toexploit nature’s successful ideas (Bar-Cohen, 2006;Benyus, 1997; Vincent, 1998), we employ the bio-mimetic method herein to determine how animalsurvival instincts and practices can enable a moreinnovative and effective approach to the strategiesand underlying capabilities of organizations strivingto withstand hostile environments. Analyzing basicresemblances as shown in Table 1, we explore the fitbetween the survival strategies of animals with theirhostile environments using three metrics familiar tomanagers (Gadagkar, 1997).

Principally, the metrics in Table 1 correspond tofour interrelated issues. First, the hostile environ-ment may require organisms and organizations tofocus on cost efficiency and effectiveness to meettheir objectives. Second, focusing on cost efficiencyis essential for managers in modern organizationsthat face less favorable market conditions; similarlyin the natural world, when the context turns hostile,animals need to economize their usage of energy tosurvive. Third, increasing the number of customers,their satisfaction, and their amount of business isimperative for positive cash flow and organicgrowth–—key metrics for managers; in the sameway, for subsistence, growth, and reproduction,animals need to locate and catch calories to survive.

Fourth (and finally), similar to organizations’ objec-tives, animals seek to avoid disruptions and safe-guard continuity. Business disruptions threatenperformance in the short, mid, and long term.Animals need to avoid dangers (e.g., prey need tosteer clear of predators) and just like in the businessworld, both animals and managers are often blind tohigh impact, hostile events. Such analogies havetheir hazards, but here they help us to conceptual-ize and illustrate alternative strategies for manag-ers dealing with external hostility (Bonabeau,Dorigo, & Heraulaz, 1999; Gavetti & Rivkin, 2005).

We sought to understand whether the survivalcapabilities and resultant strategies that haveevolved in animals also resonate with managerswho are struggling with hostile environments. Ourresearch had four phases. The first phase includedclustering various ways in which animals ensuresurvival in hostile environments and collating thesesurvival strategies from the animal kingdom. Draw-ing on biomimicry, the second phase of our researchled us to the identification of four basic copingcapabilities and survival strategies that haveevolved in animals and that can be successfullydeployed by managers. In the third phase, to gaina better understanding of the challenges managersface in managing in their environment, we pre-tested the ideas with small groups of participantsin strategic management executive programs atRotterdam School of Management and in the Masterof Science programs at EMLYON Business School andGrenoble School of Management. When we dis-cussed our ideas with participants, they concurredwith these survival strategies. In the fourth phase ofour research, we discussed the emergent strategieswith groups of experienced managers registered inCranfield School of Management’s Executive MBAprogram (2009-2010) and Imperial College London’sFull-Time and Executive MBA programs (2010-2011),who also concurred with the survival ideas. Ourresearch and subsequent individual discussions witha sample of delegates enabled us to discern howthey managed their businesses in hostile environ-ments, and which of our four coping strategies bestillustrates their approach to handling and survivinghostile environments.

Do you have a survival instinct? Leveraging genetic codes to achieve fit in hostile business environments 83

Table 1. Strategy metrics for comparative analysis

Characteristics of HostileEnvironments (Context)

Business Strategy Basic Resemblances Animal Strategy

Less resources available to operate Reduce costs Reduce input Reduce energy usage

More efforts needed to operate Increase customerattainment

Increase output Increase calorieconsumption

Objective Avoid disruption Safeguard continuity Ensure survival


3. Organizations coded for industries

Animals’ survival instincts are largely encoded intheir genes; these genes are active, or switchedon, functioning as capabilities in the way we pre-viously discussed this term. They allow the innova-tive biological infrastructure and storage areas oflearning to develop and accumulate through evo-lutionary processes. As a result, bears hibernatewhen food is scarce and seagulls flee from threat ofdanger. The implication is that innate survivalstrategies offer highly efficient reflexes to coun-teract hostile environments a species frequentlyencounters. Other elements of animal behavioralroutines are clearly learned through experience,real or simulated. For example, lion cubs learn howto fight and hunt via play practices and groupexercises.

However, greater variability in how hostile envi-ronments differ may expose limits to one or theother strategy (Mintzberg, 1991). Consider a poison-ous animal encountering a new predator that isimmune to its venom. Similarly, consider the poisonpills that can help management avoid unsolicitedtakeovers of their company; then, suddenly, regu-latory change renders these strategic responsesillegal. In other words, animals are largely lockedinto their own particular species’ survival strategy,just as companies can remain locked into theirindustries. Especially related to such enterprises,highly unlikely events with devastating consequen-ces have become known as black swans (Taleb,2010). Increasing the odds of survival is possible ifa species can manage more than one survival strat-egy and the transition between strategies. In na-ture, this adaptability is also largely encoded; forinstance, bears can both fight and hibernate whenappropriate. Organizations need to develop similarcombinations of operational capabilities (Flynn, Wu,& Melnyk, 2010) that ensure the exploitation ofexpertise in industries, but they also need to ensurestrategic or dynamic capabilities that enable anorganization to renew and adapt to increasinglyhostile environments.

While animals are preprogrammed by the geneticcodes which define their species, organizationsare preprogrammed by existing industries and canadapt to changing circumstances, often throughlearning from their own or others’ experiences(Helfat & Peteraf, 2003; March, 1991; Senge,1990; Stinchcombe, 1965). Organizations develophighly specialized operational capabilities to exploitexisting opportunities (March, 1991), and they seekto develop dynamic capabilities enabling them tomodify existing capabilities (Helfat et al., 2007).The specialization, or fit, of animals in specific

environments/niches helps them to eschew rivalryand ensures survival. Similar to specific organiza-tional forms that align with specific industries, ani-mals’ adaptation to their environments can enhancefitness. This relative degree of specialization, ge-netic and behavioral, makes these survival strate-gies highly effective in environments that arehostile in specific and stable ways.

4. Four capabilities-based practicesfor ensuring strategic fit

We can see that the majority of industries havepredetermined codified capabilities. It follows thatcompanies are coded to succeed in their industries,similar to animals for specific niches. However,companies are also coded for the founders’ valuesand goals (Stinchcombe, 1965) in the way thatphenotypes build on genotypes. We believe thephenotypes can change quickly, while industriestake longer to evolve. Table 2 depicts the key indus-tries we explored, and whether these industriesdeveloped fight, flight, search, or sleep capabilities.For instance, aerospace manufacturers are typicallyfounded by military personnel or entrepreneurs; automanufacturers are usually founded by engineers ormarketing experts; and private equity companies arenormally founded by bankers, scientists, or politi-cians. The specific founders and their values codifythe way companies behave and may alter theindustry specific codes, which has implications forcapabilities developed to cope with hostile environ-ments. However, the key implication is that compa-nies could perhaps develop other complimentarycoping capabilities, an important point that the mas-ters students and executives strongly supported inour discussions. Next, we explore in more detail thefour strategies and related capabilities for creatingstrategic fit with a specific hostile environment.

4.1. Practice #1: Building fightcapabilities–—Attack an obvious source ofhostility

Putting up a fight is the strategy of choice for wellresourced, aggressive companies in specifically hos-tile environments that threaten to erode their com-petitive advantages. Fighting requires readiness.Lions illustrate the distinct survival instincts tomaster the harsh hostility of their environments.When faced with specific threats from other domi-nant animals, they become alert and are ableto attack swiftly via forceful strikes employed inmultiple adaptations. Lions are quick, have greatvision, and can be vicious if challenged for resources

84 T. Lawton et al.


or territory. In the heat of the savannah, thesepowerful beasts clash with cheetahs and hyenasfor the terrain and prey that guarantee survival.These conflicts are direct, involve tremendous forceand reserves of resources, and are–—at times–—un-forgiving. Lions are always prepared to fight for theirsurvival, and will expend all necessary energy andeffort to avoid defeat. Typically, organizations thatfollow lion strategies take a proactive role in goingafter new customers, and may adopt direct andforceful approaches of doing so. These companiesconfront and tackle competitors rapidly, and withsignificant resource deployment. This may result ina price war or an advertising blitz. Such fightingstrategies are pursued by proactive companies thatwant to face down competition and control theirhostile environment, instead of having it controlthem.

To see a lion strategy applied to organizations, weneed only consider Google’s attacks on Microsoft(Vascellaro & Smith, 2009). Having bided its timewhile building up market strength and brand equity,Google launched a full frontal assault on the oncedominant software giant, challenging Microsoft forexisting markets in word processing and spreadsheetapplications, and trumping Microsoft in new marketssuch as cloud computing. While Microsoft makes itsliving off software for personal computers, Googlerecognizes the prospect of most computing tasksmigrating to the Web-based cloud. The two adver-saries are also fighting it out in promising newmarket spaces as varied as Web maps, online video,and cell phone software (Lohr, 2009). Like the lion,Google has evolved so that it can fight any predatorand catch any prey with its strength of innovationand market perseverance.

4.2. Practice #2: Engaging flightcapabilities–—Move quickly away fromhostile environments

Seagulls are astoundingly agile birds. They are ca-pable of thriving in many different environmentsand can move rapidly to avoid specific threats totheir survival. Being able to fly obviously helps themescape from danger, but their agility also extends tothe seeming ability to eat just about anything;indeed, a seagull’s robust digestive system hasevolved to enable it to cope with a wide varietyof food. Companies pursuing a seagull strategy havethe agility to move rapidly to avoid threats, coupledwith a capability to survive and thrive in differingenvironments. Seagull companies can combine agil-ity and adaptability to cope with specific hostility;they can swiftly escape from specific threats, andrelocate and thrive somewhere less hostile. But inorder to do this, their basic approach to valuecreation must be highly tolerant to changes in thebusiness environment.

Companies that are able to shift the location oftheir facilities from one country to another, to takeadvantage of lower wage costs or even changeproduct-market combinations, are exhibiting sea-gull capabilities. To do this, the core processes ofvalue creation must be robust and not overly de-pendent on specific contexts or locally availableskills. Typically, these companies have highly devel-oped systems that do not require specific types ofscarce labor or other inputs. Their know-how hasbeen invested in the development of these robustassets and processes, which can be put into opera-tion by employees who do not need specializedtraining. The valuable assets of the company are


Table 2. Industries coded with specific strategies

Country(e.g., context)

Hostile Environment(e.g., stimuli)

Industry Context(e.g., main influences)

Strategy

U.S. Regulation Pharmaceutical (FDA) Fight and Search

UK Credit crunch Auto manufacturer (rivals) Sleep and Search

Japan Tsunami Computer (macro factors) Sleep and Fight

France Hypercompetition Cosmetics (new entrants) Fight and Search

UK Heavy snow Agriculture (environment) Sleep and Fight

Libya Civil War Oil (governments) Fight and Search

Japan Nuclear leak Fishing (disaster) Sleep and Fight

Egypt Political instability Tourism (macro factors) Sleep and Fight

U.S. Credit crunch Banking (financial regulation) Fight and Search

Germany Deregulation Airlines (rivals) Fight and Search

U.S. Gulf War Aerospace manufacturer (rivals) Fight and Search

New Zealand Earthquake Airport authority (disaster) Fight


its systems, processes, patents, brand names, andthe like, which can be relocated or adapted. Theseassets are either physically mobile or are capable ofrapidly flexing and adapting to produce differentproducts or services. So for example, where such acompany faces increasing labor costs, this adapt-ability can be packaged up and physically trans-planted to a more attractive labor market context.

Similarly, like seagulls, some companies are ableto swiftly exit declining markets and rapidly exploitemerging markets. They can sense a threat ahead ofrival companies, and their asset configuration en-ables them to rapidly change what they produce orthe services they offer. Particularly agile retailerslike Zara observe when product lines are likely toface declining demand, and preemptively switch tonew lines faster than their competitors.

An example of a successful seagull enterprise isPhoenix. This financial services company serves theinvestment needs of high net worth individuals andis currently headquartered in Dublin, Ireland. How-ever, it is a subsidiary of the Italian bank Unicredito.Why Dublin? The business was able to benefit fromtax incentives and regulatory advantages offered inDublin. Should these disappear, Phoenix could con-ceivably relocate elsewhere, swiftly and withoutconsiderable costs. Given that its sales network isdistributed across Europe, and assuming the firm canrecruit local talent, these activities could be sup-ported just as effectively from, say, Bratislava orWarsaw.

4.3. Practice #3: Deploying searchcapabilities–—Continuously look foropportunities and threats

Animals with search capabilities typically use theirstamina to survive in hostile environments. Considersharks, which have existed for millions of years andindeed display prehistorical features. The sharkepitomizes endurance and serves here as an illus-tration of organizational search capability. Knowinginstinctively how to bear prolonged hardship andsurvive, sharks have staying power and can sensewhen and how to surge to reclaim territory. They arethe most efficient predator in their domains andprotect their hunting grounds through vigilance andpersistence. Organizational endurance is dependenton an ability to search for and find resources andsources of value–—customers or acquisitions–—evenin the most hostile of environments and often at longdistances. Most of all, search strategy is associatedwith a killer instinct that works to locate and securethe prey, regardless of environmental distractions orobstacles, and serves to ward off competitors viasuperior strength and force.

The shark strategy is exemplified by the Coca-Cola Company (hereafter, Coca-Cola) after 2004.Following the sudden death of company CEORoberto Goizueta in 1997, Coca-Cola entered aperiod of strategic drift and was eclipsed by Pep-siCo, particularly in the U.S. market. The Coca-Colashark’s dorsal and tail fins had been damaged, caus-ing the corporate animal to lose stability and veeroff course. Newly appointed CEO Neville Isdell re-paired the damage, however, returning Coca-Cola torobust health through a diversification strategy in-tended to establish the corporation as the world’sdominant competitor in a broad range of beverages.Isdell’s vision was simple: to firmly establish Coca-Cola as a total, non-alcoholic beverage company,seizing opportunities to respond to the consumer’sbeverage needs at every stage in their day, everyday, and everywhere. Showing persistence and sta-mina, the corporation has now recaptured territorylost to an assortment of smaller companies–— espe-cially its archrival, PepsiCo. Coca-Cola has morethan 3,000 different beverage products and 13brands on the market, with annual revenues inexcess of $35 billion. It is the global leader insparkling drinks, fruit juices, and ready to drinkcoffee and teas; number two in sports and energydrinks; and number three in packaged water. Inaddition to successful acquisitions and alliances(Glaceau in the U.S., Aquavision in Russia, Innocentin the UK), Coca-Cola invested in-house, resulting ininnovative products such as the highly successfulCoca-Cola Zero. These twin organic and inorganicgrowth strategies enabled the company to respondto changing tastes and demands, particularly inestablished markets, for more healthy and ‘well-ness’-oriented products. After 2004, Coca-Cola alsoleveraged internationally disseminated competen-cies in branding, supply, distribution, and sales topush Coca-Cola ahead of PepsiCo in the global battlefor sales and acquisitions. In so doing, Coca-Colareasserted the corporation’s focus, strength, anddominance in established markets and rendered itmore swift and agile in vast emerging markets such asBrazil, China, India, and Russia.

Both sharks and lions are formidable predators.The key difference between them is the lion attacksspecific rivals and threats within its domain or hunt-ing grounds, whereas the shark roams far and wide inits search for prey, enabling it to offset generalthreats that may affect less mobile or agile animals.Overly driven and too finely tuned, sharks alsohappen to swallow metal cans and car tires. Thiscan happen to companies, as well. A business cannotprepare for a hostile environment by becoming amachine that indiscriminately seeks too many cus-tomers. It must have the structure and resources in

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place to search and exploit the right opportunitiesthat ensure strategic market fit.

4.4. Practice #4: Embracing sleepcapabilities–—Display a capacity to conserveenergy

When cold weather turns rain into snow and ice, foodis harder to find for animals, and may even disappearentirely. Consequently, animals such as bears prepareto spend time in their winter quarters, expendingsignificantly reduced energy due to lower activitylevels. In this manner, they survive the criticalmonths of adverse weather more or less asleep in asafe domicile, waiting for spring. Evolution has pro-duced innovations such as hibernation as a responseto seasonal hostility.

Do companies choose to radically alter their be-havior and their organizational metabolism when thegeneral business environment turns hostile? The an-swer is a resounding yes. We have witnessed thedramatic changes that periodically alter organization-al processes in fast moving consumer goods (FMCG)companies, automobile manufacturing, tourism,fashion, and farming. During the high season, enter-prises in these sectors exploit to the maximum allavailable resources, knowing that seasonality willcause a slump in demand for the remainder of theyear.

In agriculture, part time employees’ contractsend when the harvest is over; then, farm managersand owners reduce activity levels dramatically. Inperiods of relative rest, organizations can focus onrepair, maintenance, improvement, and prepara-tion. Similar to craftsmen who fix tools that broke inthe heat of the high season, companies in sectorsranging from building and construction to hotelservices slow down periodically. Seasonality inFMCG businesses allows companies to prepare forthe next season by developing new products andmanufacturing during the off-season to build stock,while temporarily reining in marketing and salesspending.

The most recent, dramatic frosting of the worldeconomy–—following the U.S. mortgage and bankingcrisis–—showcases how companies can outcompetetheir rivals with sleep and size strategies. After theLehman Brothers shock, banks ceased to give outloans, which was for many a core function; that isto say, they radically reduced their activity levels.The automobile industry was one of the hardest hit bythis shortage of credit for consumers, historicallyhigh oil prices, and concerns about global warming:three crises frozen together into one long winter.With Chrysler and GM severely impacted, considerhow other automobile companies executed their

sleep and size strategy even in these most severeof times.

Honda is a case in point. Between September andDecember 2008, the auto maker unexpectedly ac-cumulated a 102-day stock of Honda and Acuravehicles, up from a 30-day supply leading into theperiod. Honda recognized this glut and quickly un-dertook a hibernation strategy, lowering its activitylevels in several ways. The company stopped pro-duction on December 22 and 23, and did so for thegood part of a week in January 2009. Honda origi-nally intended to manufacture almost 1.5 millionvehicles up to March 31, 2009; the adjusted produc-tion goal was lowered to 1.3 million cars and lighttrucks. Adapting to new conditions, Honda put con-cept cars–—such as the NSX, CR-Z hybrid, and S 2000–—on hold and pulled out of Formula 1 racing, citing thehigh costs involved as irreconcilable with the harsheconomic conditions of the time. Aiming to savebillions of dollars in new product development, Hon-da consolidated the originally separately developedlocal and global versions of the Honda Acura into oneversion. The auto maker focused on small city hybriddevelopment, including super-minis, and cut downthe number of cars produced–—especially in thosecountries hit hardest by the economic crisis. In NorthAmerica, for example, the manufacturer cut produc-tion for the first quarter of 2009, which came inaddition to the 56,000 cars that had already beencanceled.

Note that most of Honda’s decisions shrank theneed for resources, reduced the activity level, andput units/parts/projects in hibernation–—withoutending them or severing relationships core to thebusiness. Compare a reduction of workforce withHonda’s reduction of work hours, a move typical ofhibernation strategies. Terminating work contractsis permanent, difficult, and costly to reverse;whereas a reduction of working hours amends con-tracts in ways that can be changed back quickly. Inother words, hibernation can allow for high flexibil-ity because low levels of activity still include moni-toring the environment and the triggering ofadequate metabolic and behavioral reaction.

If organizations cannot forecast and assess theduration of a hostile environment, they may fail tosustain low activity levels long enough to see con-ditions improve. When the environment becomeshighly volatile and unpredictable, badly executedhibernation strategies can set companies up fordisaster. For example, when a bear wakes up inmid winter because its fat reserves are exhausted,the animal is exposed to the risk of starvation.Likewise, consider cases of companies which deplet-ed their financial resources in the middle of therecent credit crunch. Management theorists refer to



organizational reserves as slack: excess resourcesthat add to overall costs, but which provide afallback in hard times and enable the company toadapt to changing environments. Building slack is anoptimization challenge that necessitates predictingenvironmental change with relative certainty. How-ever, when low visibility and high environmentalhostility make meaningful estimates impossible,companies should select a different strategy. Hiber-nation is a risky strategy if seasonality cannot bepredicted. But, some companies can get it right.

Consider Japan Steel Works (JSW), the only com-pany in the world that produces machine pressurevessels which house the coolant and reactor cores ofnuclear facilities. After a protracted time periodduring which nuclear energy was out of favor withpoliticians and the public, it returned to the foreand JSW enjoyed the benefits of ‘spring’ in itsparticular markets. The company’s order bookswere filled for years to come. However, this nuclearrenaissance experienced a dramatic turn of fortunein March 2011 following the Japanese earthquakeand resultant tsunami. These natural disasters pro-voked a nuclear meltdown of the Fukushima facili-ties, once again calling into question the safety and

viability of nuclear power around the world. Thecrisis triggered political debate in other countrieswith sizeable nuclear energy capability, such asGermany, Italy, and the United States. The wide-spread reconsideration of nuclear power appears toforeshadow another winter for the nuclear industry,including JSW, at a moment when companies hadhoped for an invigorating upturn.

4.5. The four practices

Evidenced by the four aforementioned practices,our framework to create strategic fit with the envi-ronment includes options that cover a wide range ofpossible actions as observed in nature: fight, flight,search, and sleep. These practices can be seen asinterchangeable and complementary, depending onthe nature of the environmental hostility. Realizingone or combinations of these options can involvechallenging strategic change, as they are likely to benew to the company. Introducing such innovativepractices often translates into alterations of a com-pany’s structures, systems, routines, and culture.They can be assessed by static outcome measuressuch as energy usage (costs in companies), calorie

88 T. Lawton et al.

Table 3. Practices for strategic fit

Strategy Benefits (Outcome) Drawbacks Example (Combination of Strategies)

Fight � Increase catch� Weakeningof rivals

� High costs� Riskscontinuity

� Google developed fighting capabilities using proactivity,speed, and stamina to deal with Microsoft in the mobiledevices industry. Google is able to fight in anymarketplace.� Compared with British Airways, Virgin Atlantic has moreeffectively developed vision, speed, and stamina to catchand keep loyal business customers.

Flight � Safeguardcontinuity� Low risk

� High costs � Phoenix has developed flexibility, stamina, and ability tosurvive in many environments by being able to movearound countries.� Boeing has the ability to devolve elements of itsmanufacturing line to various parts of the world.

Search � Safeguardcontinuity� Increase catch

� High costs � Coca-Cola is able to consistently search for customersthrough its ability to identify customer signals andbehaviors, even during times of war, recession, andhostility.� Pfizer is able to develop new drugs through its ability toidentify customer needs through its searchingcapabilities. The company is also able to reducecompetitive impact by using its investment in search toenhance new drug development and customerattainment.

Sleep � Safeguardcontinuity� Low costs

� Riskscontinuity� No catch

� Toyota is able to quickly shut down plants in hostilesituations, as seen during the 2011 Japanese earthquakeand tsunami disaster.� Japan Railway is able to swiftly halt its railway systemsand network, including Shinkansen bullet trains, as it didduring the 2011 Tohoku earthquake and its aftermath.


consumption (customer attainment in companies),and other ‘strategy’ measures such as speed, flexi-bility, and vision (Table 3).

5. Key lessons: Begin the journey

Animals, both predators and prey, seek to safeguardcontinuity of existence and survival of the speciesby establishing a balance between calorie intakeand energy expenditure over time. In discussionswith executives throughout our research process, itemerged that combinations of the four practices arepossible, but some combinations are more promisingthan others. Birds are skilled at searching and scan-ning the surface for prey and predators alike.Searching capabilities allow companies to spot op-portunities and threats (Teece, 2007). The mainchallenge related to searching lies in developingeffective routines without incurring high costs.Predators cannot waste their energy on searchingonly; they still have a catch to make. Likewise, preycannot exhaust their resources by analyzing theirenvironment in detail until it is too late; timelyescape routines need to be triggered to ensuresurvival.

We believe that stamina, alertness, and rapidaction enable combinations, as they support fight,flight, search, and sleep. Some industries arepredetermined to have stamina, having regularlyexperienced hostile environments (e.g., automanufacturing, tourism, air travel); this was af-firmed by the conversations we had with corporateexecutives. Similarly, alertness helps enable com-panies to activate the most appropriate capabilityat the right moment, such as shifting from search tofight. The time it takes to shift should not leaveorganizations defenseless; hence, the ability to rap-idly take action is as fundamental as stamina andalertness. However, managers must also developand switch on the four specific capabilities of fight,flight, search, and sleep, so as to manage in hostileenvironments. That said, combining these fourstrategies is not trivial. The agility required toswiftly flee does not naturally convert into sufficientphysical strength to take a stand and fight. The bestrunners rarely make good prize fighters. Likewise,hibernating is not an action pattern naturally con-ducive to search efforts. Sleep comes with the riskof missing out on change dynamics and resultantopportunities. Managers need to understand thatwhile organizations are partially predeterminedby a genetic code or a set of routines and proce-dures, they can still develop behavioral patternsthrough changing their culture. Being specializedvia disposition, it is critical that organizations

acknowledge the consequences of a too-narrowrepertoire of survival strategies to create fit.

As noted, managers must follow a process to dealwith their hostile environment in order to ensuresustainability. They can begin the journey by askingtheir management teams to consider the followingquestions in the process:

1. What are the behavioral patterns and instinctsthat exist in our business?

2. Reflecting on the most important hostile epi-sodes of the last few years, how did we react?

3. Can we conduct an honest cost-benefit analysisof these behavioral patterns?

4. Will environmental hostility require more thanone survival strategy in the future?

5. How likely is it that future success will be deter-mined by reacting the same way as in the past?

6. Alternatively, how likely is it that circumstanceswill demand alternative behavioral patterns?

Successful companies often stumble in the face ofhostile environments. They falter, in part, becausethey assume they can look into the future anddevelop a long-term strategy that will confer asustainable competitive advantage (Govindarajan& Trimble, 2005). Highly improbable events of dra-matic consequences (Taleb, 2010) can threatenseemingly untouchable market segments; considerthe aforementioned Lehman Brothers and GoldmanSachs, which had to abandon its status as an invest-ment bank. Hostile environments can erode com-petitive advantage, wipe out profits, and evendestroy long established enterprises within indus-tries. Witness the decline and failure of once un-flappable companies such as Anglo-Irish Bank, AIG,ING, Merrill Lynch, and Royal Bank of Scotland. Thefuture will present business leaders with more hos-tile environments because of the many differentvariables at play. Changes in complex financial in-struments, global viruses, terrorism, technologicalinnovation, customers’ evolving needs, governmentpolicy and regulation, and changes in the capitalmarkets interact with and overlap one another tocreate more and more unexpected outcomes withincreasingly wide ranging consequences.

Despite some hazards in analogies, the animalkingdom can illustrate results of the destruction ofniches (resulting in the extinction of entire species)and losing capabilities (resulting in becoming apredator’s lunch). The animal kingdom also inspires



solutions to reestablish or maintain strategic fit:strategies to cope with hostile environments. Manycompanies follow similar approaches. Their copingstrategies win them the trappings of success: size,cash, time, loyalty, and position. While it may bedifficult to make the necessary changes to develop anew animal instinct, companies are sometimes tooslow to effectively adopt even the approaches clos-est to their nature or culture. Changing the behav-ioral routines of companies not only requires havingthe alertness to tackle this task, but also the stami-na and rapid action to succeed. Altering culture anddeveloping new capabilities is difficult, expensive,and hard to justify to those who do not foreseehostile environments or have the courage to con-front them.

We contend that future environmental hostilitywill require managers to be more versatile to createfit. If this occurs, the success rate and consistency ofresponses to a single kind of hostility will improve.Furthermore, business leaders can prepare for hardtimes (Day & Schoemaker, 2008). They can learnfrom the animal kingdom by observing howanimals have, without conscious intent, evolvedsurvival strategies. Seeking a better understandingof animal survival instincts will help the averagebusiness leader to consider his or her own organiza-tion’s ability to adapt to–—and survive–—hostileenvironments.

Acknowledgments

Our sincere thanks to Cliff Bowman for his inputregarding earlier iterations of this article. We alsothank Sydney Finkelstein and Richard Schoenbergfor their helpful comments on previous drafts. Fi-nally, thanks to Editor Marc Dollinger, for his invalu-able guidance in crafting the final version of thisarticle.

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