In his book "The Lost World," a sequel to "Jurassic Park," Michael Crichton describes the way complex systems work.
"Complex systems tend to locate themselves at a place we call the edge of chaos. The edge of chaos is a place where there is enough innovation to keep a living system vibrant and enough stability to keep it from collapsing into anarchy. It is a zone of conflict and upheaval where the old and the new are constantly at war. Finding the balance point must be a delicate matter. If a living system drifts too close, it risks falling over into incoherence and dissolution. But if the system moves too far away from the edge, it becomes rigid, frozen, totalitarian. Both conditions lead to extinction. Too much change is as destructive as too little. Only at the edge of chaos can complex systems flourish."
There are many implications in this statement for bank management.
There are banks that believe the good old days will indeed come back. Some bankers are doing things exactly the same way for many years, believing the old ways are the answer to future prosperity. The result of such rigidity will be certain extinction since all living organisms must learn how to change and adapt if they want to evolve and survive, a truism for banks as well.
At the same time, banks that have departed completely from their core competencies and have abandoned their roots have lost the battle as well, since they've lost identity and have given up those strengths that served them so well in the past.
Only by building on core competencies and using the platform of historical strength as a point of departure to new horizons will the banking industry and individual institutions within it become successful in the future.
As I wrote in a recent article, the ostrich approach to change ("That too shall pass"), and the molasses approach ("We'll do it slowly, and we'll get there eventually") are prescriptions for failure.
Financial institutions must have the flexibility to change as an ever- changing environment demands, and they must do so without forgetting what that made them what they are.
Ms. Bird is chief operating officer of Roosevelt Financial Group, St. Louis.
