Differentiation Treadmill of Startups
Seeing the world of startups with the lenses of Darwinian evolution through natural selection
Charles Darwin’s evolutionary theory by natural selection is one of the most significant scientific achievements. In biology, the evolutionary theory elevates our understanding of the world and enables us to make more accurate predictions, which have in turn spawned discoveries and breakthroughs. A prominent biologist, Theodosius Dobzhansky, wrote in 1973: "Nothing in biology makes sense except in the light of evolution."
The evolutionary worldview can be applied to other fields beyond biological systems. In the business world, for example, the concept of 'survival of the fittest' is often used to illustrate the intense competition that startups face. This Darwinian analogy suggests that to survive, startups must outperform their competitors in terms of innovation, go-to-market strategies and execution. The implication is that only the 'fittest' companies will outlast the competition and achieve market dominance.
However, the 'dog-eat-dog' conception oversimplifies the essence of Darwinian evolutionary theory. A more significant takeaway for businesses is the importance of differentiation. Differentiation enables adaptation and the development of unique offerings or capabilities that provide a more lasting competitive advantage in today’s market environment.
Let’s look at how Darwin explains his theory. The following is one of the significant paragraphs in the Darwin’s landmark book, On the Origin of Species (1859):
As many more individuals of each species are born than can possibly survive; and as, consequently, there is a frequently recurring struggle for existence, it follows that any being, if it vary however slightly in any manner profitable to itself, under the complex and sometimes varying conditions of life, will have a better chance of surviving, and thus be NATURALLY SELECTED.
Adapt the above paragraph to a business context (bold denotes replaced words):
As many more businesses of each industry are born than can possibly survive
As long as the industry is growing, new entrants will continue to appear, while some may eventually disappear. The key distinction between a growing and a saturating industry lies in the momentum of new entrant growth. In the early stages, when demand is surging, the rate of new entrants is likely higher compared to a maturing industry where growth has slowed.
consequently, there is a frequently recurring struggle for existence
For any business, staying relevant in the market is an ongoing struggle. Failing to maintain relevance inevitably leads to non-existence. The constant struggle involves the parallel pursuit of new customers, retaining existing ones through outstanding service, efficient cost management and effective resources allocation.
if it vary however slightly in any manner profitable to itself, under the complex and sometimes varying conditions of market, will have a better chance of surviving, and thus be ADAPTIVELY SELECTED
.
This section is likely the most notable part. The vary however slightly implies differentiation, which is crucial for the creation of successful strategies in the market. Effective adaptive selection in a market environment necessitates a diverse range of options, or variations, to choose from.
If a set of strategy, culture and processes enables the business to thrive in the market, then it becomes a competitive advantage for the business, albeit a temporary one. The market mind selects the good ones (meaning: surging demands) and the bad ones (meaning: sagging demands) eventually become irrelevant. Hence, differentiation advances an industry through adaptive selection.
The following is how Darwin explained natural selection, which can be applied as a metaphor to understand differentiation, experimentation and adaptive selection in a market environment:
It may be said that natural selection is daily and hourly scrutinizing, throughout the world, every variation, even the slightest; rejecting that which is bad, preserving and adding up all that is good; silently and insensibly working, whenever and wherever opportunity offers, at the improvement of each organic being in relation to its organic and inorganic conditions of life.
In conclusion
The intention is not to forcefully apply Darwinian concepts to the domain of startups, as they represent different realms with distinct dynamics. Rather, this highlights the similarities and dialectical relationships that can exist between different disciplines. After all, a worldview is a way of seeing (and a way of not seeing). By assimilating more views, we have a better chance to enhance our way of seeing the world around us.