HP's proven ability to innovate makes it a prime example of an adaptive firm (as opposed to a static or dynamic firm). This is unsurprising, since Hewlett's hill metaphor accurately anticipated later developments in complex adaptive systems theory about technology and corporate growth. Complex adaptive systems theory uses fitness landscapes as a metaphor for how successful -- how fit -- different technology combinations make the firms that use them. In this metaphor, a company with a particularly good product, service, or process gets high fitness from its technology combination -- it is on a high hill in the fitness landscape.
Hewlett told his people to discover and occupy new high hills, rather than fight the defenses on high hills that other companies had already discovered and occupied. Intuitively, he knew that the economic fitness landscape offers many undiscovered high hills, and that his people would find them if they looked for them. Neoclassical economists are trained to view such faith in unknown future technological developments as a species of metaphysics -- unscientific speculation about unobservable entities. For example, when Karl Shell began studying learning curves -- the systematic productivity improvements that stem from production experience -- some of his Cornell colleagues proposed that he switch to the philosophy department from his current post in the economics department.
In fact, the neoclassical economists are dead wrong. Learning curves are now indispensable tools for all those firms whose business involves rapid technological advances, and even those firms whose technologies advance more slowly ignore learning curves at their peril. Moore's Law -- which says the transistor count doubles for each new chip generation -- is the most famous learning curve example, and it tells us that ten years hence our computers will offer us at least a thousand times the computing power we have today, just as surely as today's computers offer us a thousand times more power than those of ten years ago. Anyone planning to operate in the business environment ten years hence must take this very important fact into account for their decisions today. The future will not simply take care of itself, as it might have done for earlier generations not far removed.
Furthermore, successful management teams must go beyond planning with just learning curves. They must also plan with adaptation curves, a term I created and unveil in this column to crystallize the exceedingly important concept that Hewlett grasped intuitively and that neoevolutionary economists (my new term for those who study the economy as a complex adaptive system) are developing theoretically. Adaptation curves -- systematically discovering improved technology combinations -- are as real as learning curves -- systematically fine tuning applications of known technology combinations -- and scientists at research centers such as the Santa Fe Institute have already developed practical new tools that could soon help to make climbing adaptation curves as common as learning curve climbing already is.
All this leads firmly back to this column's general theme -- growing Mexico's economy. A high-growth economy requires vast numbers of the high-growth firms called business gazelles, and business gazelles come from the new technology combinations that Hewlett called undefended hills. With their conservative attitudes, though, most established Mexican managements view the learning curves and adaptation curves that gazelles require with as much suspicion, if not more, than neoclassical economists. Change surprises the typical Mexican managers, since they really expect business to stay just as is always has. They, their commerce chambers, and the neoclassically-trained (i.e., neoliberal) functionaries that act constitutionally as rectors for Mexico's economy may have to change their attitudes towards adaptation curves and learning curves for this economy to realize its potential to launch millions of gazelles.
I say may, not must, because to the extent that government functionaries permit whatever they don't explicitly and previously prohibit, new managements using adaptation curves and learning curves could quickly launch those millions of gazelles. The gazelles, in turn, would rapidly displace the established managements that lumber along with the fixed procedures that characterize their overwhelmingly static or dynamic firms. All the government has to do to transform the Mexican economy into an innovative, high growth economy like Hong Kong's is stand aside and let adaptation flourish like it has in Hong Kong. Adaptive firms will do the rest.
Readers with questions or comments for Dr. White can call
011(525)595-6045, fax 011(525)683-5874, or email white@profmexis.sar.net
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