Surfing the Edge of Chaos Mandy Culver, Kristina Swartwout, Siva Murugesan

Strategy at the Edge of Chaos New concepts in Management Thinking follow 4 stages Introduction Acceleration Acceptance Maturity The stages go through a quick transfer rate with new ideas constantly emerging about the “best” strategy

Strategy at the Edge of Chaos Strategic concepts are the threshold of management theory SWOT Five forces Competitive advantage TQM JIT These are the concepts that are the most widely used and accepted, but they cannot always be used in conjunction with one another and do not readily adapt.

Strategic Initiatives often Miss Appropriate strategic responses do not always happen fast enough “best” concept changes Today’s markets are not in a static equilibrium Markets and organizations are instead creative, evolving, and difficult to predict and control. The “best” concept changes before management or the organization can adapt We must have a strategic concept that will have a level of renewal and adaptation that will create successful execution

Complex Adaptive Systems – 4 tests Agents acting in parallel Continuously changing “building blocks” and creating new levels of organization and structure Wind down over time if they are not replenished with energy Pattern Recognition Anticipate the future These systems will recognize a pattern and use that pattern to predict the future and anticipate change

1. Complex Adaptive Systems are at risk when in equilibrium. Stable equilibrium equals death. Equilibrium is often tempting – it hides in strong values, close-knit social systems, and operating systems. Natural selection prevents death for all Authentic diversity is key to preventing death Science of Complexity has given us 4 principles Stable equilibrium = death; so a system must cultivate variety Example is yellowstone not allowing nature to use one of its internal controls of forest fires. This prevention of variety by the park caused a devestatingly large and hot fire that could have been prevented with the use of internal controls. We are drawn to equilibrium and stability, and the more comfortable we get with it, the less likely we are to respond to change. If you don’t adapt to change, you will die off

2. Self-Organization and Emergent Complexity Natural Equilibrium Emergent Complexity Simple creative breakthroughs lead to complex innovations Example: wheel automobiles You cannot see the end from the beginning Many futures Living-systems Approach Focus on the individual area of the business, rather than top-down directives If left alone, systems will merge toward natural equilibrium Emergent complexity – a few patterns will create infinite variety, but systems will always settle down to a few or more orderly states. Consequence of emerging complexity is that you can’t see the end from the beginning because complexity creates many possible futures, not one Handle emerging complexity by focusing on individual areas -what this network sees -what stresses it is undergoing -what is needed to unleash the potential

3. Edge of Chaos Move toward edge of chaos when provoked by a complex task Positive and negative feedback systems should both be excited Creative destruction characterizes the hazards near the edge of chaos “The biggest single threat to our business today is staying with a previously successful business model one year too long” –Tim Mannon, HP

4. You can’t direct a living system, only DISTURB it. Weak cause-and-effect linkages Small and isolated changes can have huge effects, while large changes may have little Coyote population example

Conclusion Complexity makes the strategic challenge more understandable Understanding the complexity and adaptability of organizations argues for broadening the traditional strategic approach