Businesses may find new ways to thrive in the middle ground between rigid control and fluid networks

Complexity and rapid change have become norms in how businesses operate. That puts huge pressure on traditional and scalable business practices, especially around innovation. Enter the concept of adaptive space. Introduced by former General Motors executive Michael Arena in his 2018 book, Adaptive Space, it is an approach that allows organizations to balance structure with the dynamism needed for innovation.
Between control and fluidity
Adaptive space is not a physical location, but a concept. It is a middle ground between rigid hierarchical control and fluid, informal networks, set up to allow innovation, experimentation and ideas to move freely across value chains. Adaptive space encourages cross-functional collaboration and learning, even in traditionally siloed environments. The aim is to enable a company to exploit existing resources efficiently while exploring new ideas and opportunities. This balance is becoming increasingly crucial as industries face disruptions from digital transformation, changing workforce expectations, and market volatility.
The model’s appeal is clear. Traditional divisional-based operating models are struggling to cope with the multiplicity and clustering of challenges (and opportunities) for product and service adaptation. It can also enhance the employee value proposition at a time when people want more from their organizations. Take the challenges posed by hybrid working. Many companies have struggled to foster collaboration and innovation when teams are dispersed. Adaptive space allows ideas to flow beyond formal structures, creating a more dynamic and resilient organization.
Leadership and adaptive space
Leadership in an adaptive space shifts from a command-and-control model to what Arena calls “enabling leadership.” Enabling leaders focus on creating the conditions for innovation and collaboration. They do not drive change top-down, but act as facilitators, allowing employees at all levels to experiment.
Leaders must learn to balance the formal structure needed for operational efficiency with the informal, organic networks that allow for the free flow of ideas. This enables them to manage the tension between exploration and exploitation, driving innovation without sacrificing performance.
The Anglo-Dutch consumer goods firm Unilever drew on the adaptive space concept when it created an initiative dubbed the Unilever Foundry, connecting internal teams with startups and innovators. The result is a collaborative environment where new ideas are co-developed and tested. R&D, marketing and operations teams come together to work with external entrepreneurs exploring consumer trends and experimenting with emerging technologies, like AI-driven insights for product development and sustainable packaging solutions. This has helped it launch new product lines in record time.
Key practices for implementing adaptive space
To implement adaptive space, a few key practices can help.
1. Innovation labs Set up dedicated teams where employees are encouraged to experiment with new ideas.
2. Cross-functional teams Foster collaboration between departments to encourage the exchange of perspectives.
3. Digital collaboration tools Invest in digital tools that allow employees to share ideas and collaborate, regardless of location. This is particularly important in hybrid work environments.
4. Hackathons and internal competitions Encourage a culture of experimentation by organizing company-wide hackathons or competitions to develop new ideas and products.
The shape of the future
As organizations continue to navigate a fast-changing world, adaptive space offers a management practice that is both innovative and necessary. By balancing formal structures with the fluidity of informal networks, adaptive space creates an environment where innovation can thrive alongside operational efficiency.
Companies that embrace this approach will be better positioned to respond to industry disruptions, enhance employee engagement, and drive long-term success.
Perry Timms is founder and chief energy officer of PTHR, a consultancy aiming to create better businesses for a better world. He is a TEDx speaker, top-selling author, and a member of HR Magazine’s Most Influential Hall of Fame