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Punctuated Equilibrium Theory Applied To Business

PUNCTUATED EQUILIBRIUM THEORY APPLIED TO BUSINESS

I have been thinking a lot lately about PET – Punctuated Equilibrium Theory. More specifically how it applies to business, economics, organization theory and structure, etc. PET original came out of biology and anthropology in theorizing types of biological and anthropological evolution phases. However, in my case and recent thinking, it is more focused on business and organizational theory.

Thus, punctuated equilibrium theory/model of organizational transformation emerged as a prominent theoretical framework for explaining fundamental changes in patterns of organizational activity (e.g. Gersick, 1991, Miller & Friesen, 1980, 1994; Tushman & Romanelli 1985). As described by is proponents, punctuated equilibrium theory depicts organizations as evolving through relatively long periods of stability (equilibrium periods) in their basic patterns of activity that are punctuated by relatively short bursts of fundamental change (revolutionary periods).

Revolutionary periods substantively disrupt established activity patterns and install the basis for new equilibrium periods. Gersik (1991) described the largely independent emergence of punctuated equilibrium models over a number of social and physical science disciplines, including biology (e.g Gould, 1989, sociology (Kuhn, 1970), and psychology (Levinson, 1986), and at several levels of analysis in organization theory, (Gersick, 1991).

Why is this interesting? Well, if you apply PET to the last 25 years you can see some very interesting activity and result patterns. When looking at where we are today through the proverbial PET view, we can also see a very interesting period in our society, business, economics, etc. Specifically in how business operate, consumers behave, employee’s and organizations behave, industry expand and contract, etc.

The key points of Punctuated Equilibrium Theory in my thinking are these:

• Companies cycle through stable and dynamic environments. Those that are solidly run, managed and organized thrive in dynamic environments, those that aren’t, fail and flail.
• Today’s dynamic multi-dimensional global organizations contribute to a level of equilibrium if the company is poised and organized to handle environmental change.

Clearly, today, we are in an environment of rapid change, uncertainty, etc. – Revolutionary Period. What’s so interesting about that? Well, several things. One, its interesting in that those companies that were complacent in their operations, organization, etc. are now dying or gone i.e. GM, Chrysler, Bear Sterns, etc. Those that were innovative, multi-dimensional and able to respond versus react to a shift in the environment are successful i.e. Apple, Wal Mart, etc.

Two, its interesting from a sociological sense. Specifically, how people purchase. Again, the paradigm has shifted to rapid and radical changes in our world, marketplace, etc.. How consumers behave in that shift and understanding that behavior can be very important to the success of an organization. Finally, as far as a theory goes, it seems to shed light on some interest trends in a variety of analytical segments that are extremely relevant in today’s world and economy. If the theory is correct, this revolutionary period will ultimately be followed by a periord of equilibrium. The big question is, are the intervals between equilibrium and revolutionary periods getting shorter due to technology and the speed in which our world operates? And, is that a good thing or a bad thing? Understanding this theory and applying it as I have in high level outlined can reap some strong, useful and important actionable benefits. it can also tell us a lot about ourselve and our organizations. I am still thinking through it, but I am intrigued. I would like to get your thoughts.

What do you think?

-DF

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Written by David Frederick

May 19, 2009 at 9:48 PM

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