It is proposed in the Theory of Punctuated Equilibrium that biological species can remain unchanged, or only have a marginal change in their form, over a lengthy time period. This period is called ‘stasis’. However, in order to survive and avoid extinction when the environment becomes unfavourable, the pace of evolutionary change needs to be accelerated. This results in a relatively discontinuous change in the species form. In other words, a new species comes into existence. Thus, according to this theory, a pattern of relatively long and stable periods punctuated by rapid and discontinuous change is typical of natural biological systems.

A similar pattern of change occurs in organisational dynamics (e.g. Miller and Friesen, 1984; Tushman and Romaneli, 1985, 1994; Gersick, 1988, 1991). As mentioned earlier, change in organisations is often characterised by a lengthy period of incremental, gradual and adaptive change (convergence) alternated or punctuated by a short period of a widespread, discontinuous and transformational change (reorientation). Modelling both phases of change thus poses a challenge because the traditional open systems model, which is based on the concepts of homeostasis and steady state, can only describe and explain the ‘stasis’ or ‘convergence’ phase. It does not encompass the type of change that occurs in ‘transformational’ or ‘reorientation’ phases. Consequently, we incorporate the theory of dissipative structure into the model.

The degree of systemic change depends on the magnitude of environmental contingencies or external fluctuations although we have also argued that internal fluctuations play a vital role in inducing change in complex systems. Based on the argument made previously in the open systems and dissipative structure model, the organisation as a complex system can neither always maintain itself in a steady state (or homeostasis) nor keep on transforming without reference to the magnitude of fluctuations or disturbances that impinge upon it (see Tushman and Romaneli, 1985 for more details).

It is much more difficult for major transformational change to occur, or be implemented, because it typically involves a profound reformulation of the organisation’s mission, structure and management, and fundamental changes in the basic social, political, and cultural aspects of the organisation (Levy, 1986; Levy and Merry, 1986). Hence, the concept of transformation covers both operational processes and psychological dimensions of the organisations. According to the theory of dissipative structure, transformational change requires energy (both human and non-human) to push the organisation across the instability threshold by means of necessary fluctuations, from within and without, to inflict a morphological change. In contrast, the concept of adaptation deals only with the modification of the system’s structure or structural properties in such a way that the functional properties of the system are left largely or entirely unaltered when facing environmental disturbances (Van Gigch, 1978). Therefore, organisations as systems can only maintain their steady state or remain in a homeostatic equilibrium.

Adaptability is related to organisational structure in that it is about bringing the organisation into harmony with the changing environment, and the adaptive function works in two directions. First, it modifies internal structures to correspond with external changes, and second, it attempts to control the environment (Van Gigch, 1991). Moreover, the concept of adaptation is not limited to structural change but also relates to other factors as well (e.g. procedures and technology).

Figure 11.7, “Punctuated equilibrium model showing adaptive (convergence) phase A and transformational (reorientation) phase B.” portrays how homeostasis, adaptation and transformation constitute the punctuated equilibrium model, and how they are interrelated. The graph represents the systemic behaviour, caused by the interaction among the organisation’s subsystems and between them and the external environment. The pattern of such interaction is fundamentally determined by the system’s structure (Cavaleri and Obloj, 1993) and can be measured by the system’s output (Kramer and De Smith, 1977). The interaction between organisations and their environment results in variation in the system’s behaviour. Phase A represents a system in a convergence period (β₁), which is mainly typified by its maintenance of a homeostatic condition (or steady state) – a condition in which the system is attempting to realign or adapt itself to the minor changes in the environment. Phase B represents a reorientation, which is characterised by a discontinuous and disruptive change that results in a reformulation of the organisation’s basic constituents (i.e. structure, strategy, process/technology and psychological component) and is transient in nature. If the transformational change is successful the organisation will attain another equilibrium state (or convergence period) β₂ and remain in this state until conditions prompt another transformation. At β₂ a new organisational form, which is more complex and more capable of dealing with the environmental contingencies would be expected to have emerged. Therefore, the unified model, which constitutes the traditional open systems model and the dissipative structure model, can portray the whole change phenomenon.