Organizational Adaptation Theory: Definition & Application

Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Organizational adaptation theory addresses how business change in the face of market or environmental factors. In this lesson, you'll learn more about this business and see some examples of it in action.

Netflix's Adaptation

When Netflix first burst onto the scene in 1997, it presented a new and innovative way for consumers to watch the latest movies on DVD: by mail. Thanks to a more tech-savvy consumer base with less time on their hands, Netflix was able to capitalize on the idea of bypassing the video store on the way home from work. There were other benefits, too. A large selection of titles and the ability to keep a DVD as long as you wanted, eliminating those pesky late fees stores like Blockbuster became known for.

Netflix was able to adapt its business model to appeal to consumers who wanted to stream movies.
netflix, organizational, adaptation

But when was the last time you received a DVD from Netflix in the mail? Probably not very recently, right? As mobile device usage started to soar, internet speeds continued to quicken and smart TVs started to become a mainstay in American homes, Netflix had to learn to adapt by moving to a more streaming-based service to appeal to changing market conditions.

It's one example of organizational adaptation theory, and that's the subject of this lesson.

What is Organizational Adaptation Theory?

Organizational adaptation theory asserts that businesses will change how they operate or how they function in an effort to keep up with changing market conditions or shifting environment factors. This could all be due to things like new laws that impact an industry or changing consumer demands, for example. Organizations that adapt, according to the theory, are more successful long-term.

Airbnb, the company that allows people traveling across the country (and even the world) to rent someone else's property, essentially acting as small-scale, unofficial hotel rooms. Airbnb is another good example of organizational adaptation theory in practice. New regulations in many cities are clamping down on what fans of Airbnb can--and can't--do when listing their properties. Airbnb, for all its successes, has faced challenges. For example, it's formed an alliance with the real estate industry's Century 21 to come up with more rental-friendly leases. At its core, this is a shift in how Airbnb does business. However, it's a necessary one for the company to continue to survive and thrive.

Organizational adaptation requires businesses take corrective action and improve business processes, as a result of changes forced upon it from the outside environment.

Reactive or Proactive?

The concept of organizational adaptation theory can prompt a business to act in one of two ways:

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