Lessons from Evolutionary Biology

Moving Beyond Mere Survival and Scale your Business to New Heights

Imagine a landscape where peaks and valleys represent the fitness of different strategies for success. In evolutionary biology, the concept is known as the adaptive landscape. Relating it to business provides a fascinating parallel for acquisition entrepreneurs. One key feature of this idea is the “low adaptive peak,” a position of relative stability and moderate success. Applying this concept can be a game-changer for small business owners in pursuit of growth and innovation.

In an interview, film-maker Matt Johnson describes “low adaptive peak” as a skier who learns to snowplow down the hill. Yes, it will get you down the hill, but it’s not ideal skiing is it? You’re ‘surviving’. It’s the lowest possible adaptive sophistication for the activity you’re pursuing. Mediocrity in a nutshell.

Now let’s apply this metaphor to acquiring and operating a small to medium-sized business.

The Adaptive Landscape: The Biological Blueprint

In evolutionary biology, the adaptive landscape determines how different genotypes correspond to points on a landscape with varying elevations. The height of each point signifies the fitness of that genotype. High points represent genotypes with high fitness, while low points indicate less optimal adaptations.

A “low adaptive peak” is a local maximum — a point where a population is reasonably well-adapted but not optimally so. Essentially, “good enough” to survive. To reach higher fitness peaks, the population must traverse fitness valleys, which involves a temporary decrease in fitness. Many entrepreneurs and acquirers refer to a part of this process as the “J curve”: Revenue and Profit dip after an acquisition, and fingers-crossed, it’s up and to the right. This concept highlights the challenge of moving from a stable but suboptimal state to a more advantageous one. In nature, and in business, the process is fraught with risk and uncertainty.

Buying a Small Business: The Low Adaptive Peak Dilemma

When you buy an existing small business, you’re looking to acquire a venture that is stable and moderately successful — a business at a low adaptive peak. This business has found a way to survive and generate profits in its current market environment. However, just as in biological evolution, there may be higher peaks representing greater success and profitability that you as the new owner hope to reach.

Stability vs. Growth: The Balancing Act

The key challenge for you as the new owner/operator is balancing the stability of the current business model with the potential for growth. Incremental improvements might maintain the business at its low adaptive peak, ensuring continued stability but limiting growth. But, bold, transformative changes could allow your business to reach higher peaks. Just know you’ll need to navigate through a period of risk and potential setback. Maybe even multiple periods of peaks and lows.

Strategic Transition: Moving Toward Higher Peaks

To move your business from its current state to a higher adaptive peak, you will need to carefully assess the risks and benefits. This involves evaluating potential growth opportunities like entering new markets, innovating current products or services, improving operational efficiencies, or adopting new technologies to more efficiently run your business.. Each of these opportunities represents a higher adaptive peak, but reaching those peaks requires managing the temporary decrease in performance — like traversing a fitness valley.

Innovation and strategic adaptation are part of business evolution, much like genetic drift and natural selection play roles in biological evolution. If you can encourage a culture of innovation and be adaptable to market changes, you stand a better chance of moving beyond the low adaptive peak of ‘meh, good enough’.

Case Study: A Small Café’s Journey

Let’s say you buy a small café that is moderately successful in your local market. The café, with its loyal customers and decent profits, sits comfortably on a low adaptive peak. However, you, the new owner/operator see potential for greater success.

Current Stability: The café’s existing model works well, providing stability but limited to no growth.

Potential Higher Peaks: You introduce a new menu, leverage online marketing, expand to catering services, or open new locations hoping to elevate the café to higher adaptive peaks with greater profitability.

Challenges: The challenges you might face involve initial costs, staff training, and potential disruption of current operations. There will probably be a period where your business experiences lower performance before achieving higher success.

Embrace the Journey

Grasping the concept of a low adaptive peak will help you recognize the balance between stability and growth potential. It encourages you to evaluate whether your current business model, while stable, is limiting your long-term success. You’ll need to come up with strategies for navigating short-term challenges if you want to achieve long-term gains. Embracing these lessons from evolutionary biology and adapting them to your market conditions can be the difference from mediocre success to extraordinary achievement. Maybe all you care about is whether or not cash flow can service the debt? But if you’ve read this far, you’re probably not one to settle on the status quo.