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

2. Strategy at the Edge of Chaos New concepts in Management Thinking follow 4 stages • Introduction • Acceleration • Acceptance • Maturity

3. Strategy at the Edge of Chaos • Strategic concepts are the threshold of management theory • SWOT • Five forces • Competitive advantage • TQM • JIT

4. 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.

5. 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

6. 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

7. 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

8. 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

9. 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

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