The Eleven Principles of Adaptive Management
“Adaptive management” is the process we use to make realtime adjustments and modifications to our original plan so that it survives and thrives in the changing business environment in which it operates. Things happen so quickly that we can’t accurately predict how our world will unfold. So we can’t cling to our original plan. Instead, we have to construct our plans with the idea that they are made to evolve; that they are fluid, not written in concrete. There are eleven principles of adaptive management.
The principle of problems tells us that a business model is the solution to a hierarchy of problems. The more problems you need to solve, the more complex your plan becomes. Your strategy should be based on a primary problem and your hypothesis for solving it. For Wal-Mart, low price is the problem and their business model is designed to solve it. For Polaroid, instant photography was the problem and analog film was the solution. And for H&R Block, preparing your taxes so that you get the maximum refund is the problem and a hundred thousand tax preparers is the solution.
The principle of solutions is a corollary to the first principle. In it, we define “tactics” as the things we do to solve our problems. This principle says that the effectiveness of these tactics will naturally degrade over time, so adaptive management is the constant search for new and improved solutions to our problems; that is, new and improved tactics. Each tactic, in turn, will create a new set of problems and so create a new set of solutions. For example, if direct mail is the solution (tactic) to your sales problem, this creates a whole new set of problems like what list do we mail to, what offer do we make, what package do we send, and when do we send it?
The principle of force says that we need to carefully choose our competitors and compete at a place where we have superior forces. This is based on the concept of “positioning,” how you position your company in the field of competitors. You use it to choose the place, the battlefield, for you to compete in. For example, in the beginning Facebook chose to compete only at colleges, and not to battle with Myspace as an open social network until Facebook had the firepower to do so.
The principle of concurrent thinking helps us to answer the age-old dilemma between strategy and tactics. Which comes first, tactics or strategy? Is the development of a plan a top-down process (strategy first) or a bottom-up process (tactics first)? The answer is that it’s both. Concurrent thinking is the ability to perceive things from the top down (strategically) and, at the same time, how things fit together from the bottom up (tactically). This is how we create strategic alignment, a fusion of strategy and tactics.
The principle of cascading objectives is how we turn our strategy into a set of specific objectives and the metrics associated with them. Since our model is composed of a hierarchy of problems, our objectives will conform to that hierarchy. Robert E. Lee’s objective of taking Little Round Top at Gettysburg cascaded from the objective of breaking the Union line at Cemetery Ridge, since Little Round Top provided a sniper vantage point that could protect the Union line.
The principle of multiple futures says that it’s impossible to predict the future, long term, because business operates in a chaotic environment in which there are multiple competitors and multiple customers all interacting in ways that are impossible to quantify. So instead of trying to predict a single outcome, the adaptive manager considers multiple scenarios, which allows him to construct an inventory of solutions and gives him the insight and intelligence to make real-time adjustments to the plan. It’s because of multiple futures that we need adaptive management in the first place.
The principle of paper plans states that the plan itself is worthless. The act of planning, not the plan, is important because it educates you and your field managers and so allows you to make intelligent adjustments during implementation. In today’s world, paper plans become obsolete the moment you print them.
The principle of doubt says that “suspicion” is the driver of the evolution of a business model, and adaptive managers need to doubt their own forecast and business models. This is the only way we can ensure intelligent adjustments. Intel president Andy Grove put it best when he said, “Only the paranoid survive.” Don’t be fooled by the power of positive thinking; it needs to be tempered with negative thinking.
The principle of correlation and causation says that we base our strategy on a hypothesis for solving our problem. The hypothesis is based on cause and effect. In other words, we develop tactics to drive a certain effect. We use correlation to measure the results, but we need to be careful because we can be misled by lurking variables and faulty data. Correlation doesn’t always mean causation.
The principle of alterations tells us that there are two ways a business model evolves from Plan A to Plan B, two subprinciples. The first is the principle of strategic alterations, and it’s when we use our existing tactics to solve a new problem. Arm & Hammer using baking soda to absorb refrigerator odor is a form of strategic evolution. The second is the principle of tactical alterations, and that’s when we come up with a new tactic to solve an existing problem, like Gillette adding more blades to its razor.
The principle of strategic debate is a question of corporate culture. Most large organizations demand blind adherence to the corporate mission statement and corporate plan. By creating corporate rigidity, this kills the ability to evolve. Instead, adaptive managers encourage dissension and debate, creating a culture intent on improvement. This creates corporate fluidity.