Change is difficult. Even the most potent firms with the best resources can fail because they cannot react effectively to sudden environmental changes, such as the emergence of the Internet. (Remember Blockbuster?) Or Web 2.0. (Remember Yahoo?)
Why is this? Why are companies so slow to adapt? In today’s rapidly changing world, this is a crucial question. Julien Clement is an assistant professor of organizational behavior at Stanford Graduate School of Business. He says that we don’t know the answer.
It’s not hard to fail. Companies can use a flawed strategy to respond. Internal politics or vested interests can hold the company back. They can also fail to execute due to a lack of familiar new skills. At a basic level, companies need to acknowledge the necessity of change. Anyone who has ever worked in an organization knows that organizations often operate with a blinding momentum. They paddle furiously and in the same direction, even falling into insolvency.
Clement was particularly puzzled by this rigidity. Why are established companies so slow to change their course even thohaving experienced employees in both the C-suite and the front line? He wondered why companies often responded to significant challenges in inadequate, small ways.
Researchers have been stuck in this problem for a long time. These case studies are subjective and anecdotal. Clement says it’s challenging to study howpt because you need a large number of firms as well as a wanduring their choices.
He had an idea a few years back. He recalls, “I was writing a theoretical article using agent-based modelling.” On a computer, we would simulate an environment where the environment changed now and then, and companies tried to adapt. This was all hypothetical — we did not plan to use accurate data. Around that time, he would relax before bedtime by watching Twitch video game tournaments. One night, he was struck by the idea: “Wow, I can look at this in that context.”
He realized that video games, exceptionally professional multiplayer games known as eSports, which have exploded in popularity recently, would be an almost perfect natural laboratory. Wait, what? Video Games?
Barbarians at Gate
Clement laughs. “I know it sounds crazy.” All the elements are present: eSports is a high-stakes and profit-seeking business that can earn millions annually. They use strategy and tight coordination in a world where game updates bring about sudden and unforeseen changes. In eSports, every action is recorded digitally. Clement was able to track the strategies of teams over time by monitoring every mouse click. He could also see exactly their reaction to changes.
He says that the software provided a “deep visibility” into individual behavior and aggregate behavior. We’ve never seen that level of detail in organizational research before.
Clement chose to concentrate on a game called Defense of the Ancients 2. It involves two teams of five players each, battling to destroy the Ancient, a glowing mystical structure, in the fortresses of the opposing team. Each player chooses their “hero” before the match. These heroes have different powers and are named Bristleback Enchantress Lifestealer.
Heroes have a variety of powers, from temporary invisibility to gravity-defying jumps. This allows each player to play a role in their team’s strategy. Another player might provide cover, while the first is hunting creeps to gather resources. One group may use decoys to set up for an attack or engage in guerrilla warfare to disrupt the enemy’s attempts to gather resources. Supply chains are crucial in every business. Gold can be earned and traded for healing potions, swords, and bludgeons.
Clement interviewed professionals and attended DOTA events as part of his fieldwork. It was clear that they were motivated by the fact that eSports games are viewed online by large audiences, and winning a tournament can bring in millions of dollars. The players are as committed to their success as any member of a start-up company with stock options.
Clement confesses, a little sheepishly, that he began playing the game himself. “I had no choice, you see; I needed to play it myself to better understand the game. “It’s all in the name of science.”
Separation and the Illusion
He believed that the structure of an organization, of any kind, shapes the way individuals within it see the world. This worldview can also make people slow to adapt.
Humans are instinctively divided into departments when they come together for a common goal. For example, one department is for sales and another for production. Clement says that the purpose is to reduce the burden of managing this complex social system, even though we don’t think about it this way.
So, a group of closely-knit people are assigned highly interrelated tasks: they have their wing within the building and their own Slack channel. Organizations are essentially networks of these clusters.
It makes sense to divide the work. This allows us to concentrate on our part of the puzzle and develop specialized abilities. It also keeps us from thinking about too many things at once. He says that we mentally map out our work environment. This structure allows us to filter out much of the system-level complexity.
Trouble comes when things change. It’s unlikely that anyone would notice if a shock that seems to affect a small group spreads throughout the company. Clement says that we tend to see something through our chronic concerns when it changes.
While firms may be able to respond locally, they fail to consider the need for global change in how the organization operates. If this theory is true, then the division of labor that makes a company effective in stable periods can make it less effective during disruption.
