Population Ecology

This entry introduces a different perspective on relationships among organizations. The population-ecology perspective differs from the other perspectives because it focuses on organizational diversity and adaptation within a population of organizations.

A population is a set of organizations engaged in similar activities with similar patterns of resource utilization and outcomes.

Organizations within a population compete for similar resources or similar customers, such as financial institutions in the Seattle area or car dealerships in Houston, Texas.

Within a population, the question asked by ecology researchers is about the large number and variation of organizations in society. Why are new organizational forms that create such diversity constantly appearing?

The answer is that individual organizational adaptation is severely limited compared to the changes demanded by the environment.

Innovation and change in a population of organizations take place through the birth of new types of organizations more so than by the reform and change of existing organizations.

Indeed, organizational forms are considered relatively stable, and the good of a whole society is served by the development of new forms of organization through entrepreneurial initiatives. New organizational form meets the new needs of society more than established organizations that are slow to change.

What does this theory mean in practical terms? It means that large, established organizations often become dinosaurs and perish.

Consider that among the companies that appeared on the first Fortune 500 list in 1955, only 71 stayed on the list for 50 years. Some were bought out or merged with other companies. Others simply declined and disappeared.

Large, established firms often have tremendous difficulty adapting to a rapidly changing environment. Hence, new organizational forms that fit the current environment emerge, fill a new niche, and over time take away business from established companies.

According to the population-ecology view, when looking at an organizational population as a whole, the changing environment determines which organizations survive or fail.

The assumption is that individual organizations suffer from structural inertia and find it difficult to adapt to environmental changes.

Thus, when rapid change occurs, old organizations are likely to decline or fail, and new organizations emerge that are better suited to the needs of the environment. For example, when BlockbusterOpens in new window couldn’t adapt to Netflix’sOpens in new window impact on how people watch movies at home, the company’s 9,000 video rental stores declined by March 2019 to a single store in Bend, Oregon, where managers say they have no intention of closing.

IN PRACTICE | Blockbuster
Unless you live near Bend, Oregon, you probably don’t remember Blocbuster. When Netflix first came along, Blockbuster had around 9,000 stores and 60,000 employees. Customers walked in, browsed through hundreds or thousands of movie titles to pick one or a few to rent for the weekend, maybe added some popcorn and candy at the cash register, then took the videos home to watch. Those days are long gone. Blockbuster filed for bankruptcy in 2010, and the number of stores quickly shriveled to a few holdouts. Now, the outlet in Bend, Oregon is the sole survivor.

When general manager Sandi Harding heard that her store would be the last Blockbuster on the planet, she posted a message on Facebook saying, “Holy Cow it’s exciting!” The store held a party, serving a special beer called the Last Blockbuster crafted by a local brewery. In addition to videos for rent, the store sells Blockbuster-branded merchandise such as trucker hats, coffee cups, and magnets that are made by a local teacher. The Bend store became a Blockbuster franchise in 2000. It has several years left on its lease and a license agreement the owners sign annually with Dish Network, which bought Blockbuster in 2011.

The store has survived partly because Bend is in a region where many small communities don’t yet have access to the high-speed Internet needed for content streaming. How long it can survive when that changes remains to be seen. For now, the store has around 4,000 active video rental accounts, and tourist sometimes travel hours out of their way to stop in the last Blockbuster. “It’s almost reenergized us, that we’re the last one,” Harding says, “They treat us like celebrities.”

What Hinders Adaptation

Why do established organizations have such a hard time adapting?

Michael Hannan and John Freeman, originators of the population-ecology model of organization, argue that there are many limitations on the ability of organizations to change. The limitations come from:

  • Heavy investment in plants, equipment, and specialized personnel limited information
  • The established viewpoints of decision makers
  • The organization’s own successful history that justifies current procedures
  • The difficulty of changing corporate culture

True transformation is a rare and unlikely event in the face of all these barriers. Consider how a Swiss watchmaker is trying to adapt in a changed world.

IN PRACTICE | LVMH Moët Hennessy Louis Vuitton
When someone asks What time is it? do you check your watch or your smartphone? If you’re like many people today, you haven’t worn a watch for years, if ever. Now, a 68-year-old Swiss watchmaking executive, Jean-Claude Biver, is doing everything he can to get younger generations interested in buying Swiss-made watches before the centuries-old industry dies out for good.

LVMH’s least-expensive TAG Heuer model is $1,000, but many luxury Swiss watches cost more than a new car. In addition, new technology companies are offering wrist gadgets that track movements, display e-mails, and organize the wearer’s social life. Biver was quick to recognize the threat of Apple’s first $400 smartwatch, and he tried to turn it into an opportunity. Biver thought if TAG Heuer developed its own smartwatch, it could lure younger customers to the company’s mechanical timepieces as well. He moved so quickly to develop the first TAG Heuer smartwatch that it was ready for market just a few months after Apple’s smartwatch went on sale. Since 2015, TAG Heuer has made more than 100,000 sales of the $1,500 “connected watch,” but it didn’t meet one of Biver’s primary goals—customers still weren’t all that interested in the company’s mechanical watches.

Swiss watch manufactures have rebranded themselves to survive before, but it remains to be seen if they can do it again. One 27-year-old said of wearing a watch, “It’s a habit that I lost.” Another said Swiss watches are just too expensive. “With that money, I could do so many other things, like go on a trip.” Biver knows he’s dealing with a new mindset ins a new generation. “How can I understand the Millennials?” Biver says. “It’s impossible. I’m 68. I cannot understand. But I can learn.”

Another industry that is struggling to adapt is the traditional bookstore. When Jeff Bezos gave a talk at the Harvard Business School in 1997, one student bluntly told him, “You seem like a really nice guy. ... but you really need to sell to Barnes & Noble and get out now.”

Today, Amazon Opens in new windowis thriving and Barnes & Noble is struggling to survive. Jeff Bezos knew that it is extremely difficult for large established companies to shift to a new way of doing things.

Another example comes from KodakOpens in new window, which actually invented some of the earliest digital photographic technology but couldn’t accept that customers would give up on the company’s traditional film.

Kodak had been successful for so long and was so large and entrenched in its way of doing business that it couldn’t change substantively even when managers wanted to.

The population-ecology model is developed from theories of natural selection in biology, and the term evolution and selection are used to refer to the underlying behavioral processes.

Theories of biological evolution try to explain why certain life forms appear and survive whereas others perish. Some theories suggest the forms that survive are typically best fitted to the immediate environment.

The environment of the 1940s and 1950s was suitable to WoolworthOpens in new window, a variety retailer and one of the pioneers of the “five-and-dime store” business, but new organizational forms like WalmartOpens in new window and other superstores became dominant in the 1980s and early 1990s.

Now, the environment is shifting again, indicating that the “big box” era may be coming to a close. With more people shopping online, smaller stores once again have an advantage in brick-and-mortar retail.

Walmart has opened nearly 700 small-scale Walmart Neighborhood Markets. TargetOpens in new window has also begun opening small-format stores in urban areas. No company is immune to the processes of social change.

In recent years, technology has brought tremendous environmental change, leading to the decline of many outdated organizations and a proliferation of new companies such as Snapchat, Uber, Netflix, Facebook, Airbnb, and Twitter.

    Research data for this work have been adapted from the manual:
  1. Organization Theory & Design By Richard L. Daft