About a decade or so ago, I was introduced to "Surfing the Edge of Chaos" by Richard Pascale, Mark Millemann and Linda Gioja. This book literally shocked me, causing me to re-think EVERYTHING I thought I knew about business.
By EVERYTHING, I mean that I had just finished my PhD a few years before. My dissertation was on business planning and specifically on developing strategy for the fast-growth enterprise. At the time I was Asst. Professor of Entrepreneurship at Alaska Pacific University and I was teaching all this stuff at the MBA level.
With just my first peek at Chaos Theory & Complexity Theory I knew I had to start all over again. I literally had to throw my dissertation away. The economic foundation I had built to drive the development of strategy and the business planning process was riddled with holes - huge, gaping, complex, chaotic holes! This illusion of a foundation was based on the arrogant assumption that somehow we could use concepts of linear or deterministic economics to reliably predict the future. In traditional business planning we acknowledged complexity and chaos (without understanding them!) only in terms of risk that could be dealt with by means of crisis management plans. The more diligent of us wrote even more and better detailed technical plans in a mad scramble to cover every conceivable event only to have these dusty tomes relegated to the highest shelves in every corner office.
I researched more and more trying to rationalize my way out of dealing with these concepts: "you can't stretch these concepts from physics and biology to the social sciences," I pleaded with myself. "Economics doesn't behave this way!" Planning was comfortable. Pro formas were safe (just give them a haircut!). Stability was a goal! Strange Attractors, Fractal Forms, Bifurcation, Time Irreversibility, Sensitivity to Initial Conditions, Complex Adaptive Systems. It had to be drivel - probably just the stuff of consultants!
But I knew these concept would prove to be true. All of them. I knew it from the very first few pages of Surfing the Edge of Chaos. I even think the authors knew this would happen - they don't even start Part One until Chapter Two, as if they knew readers would need time to compose themselves.
So, what was I to do? I had to search through the debris of my dissertation to find something I could use to rebuild my theory of strategy development - someplace I could start. I settled on Collins & Porras. They were still right. Vision was still the basis of all strategy.
Collins & Porras described vision in two ways:
- Core Values and Beliefs. An organization should be prepared to change
EVERYTHING about itself at a moment’s notice EXCEPT its core values and beliefs. I absolutely concur. This is still the rock foundation we can stand on.
- Purpose. Collins & Porras describe a technique known as the “5
Why’s” to divine purpose. It answers the simple question, “what’s the point of
doing all this stuff?” Once again, I couldn't agree more. The purpose statement acts as a guiding star, never a destination. It should be unreasonable and
unattainable.
- Sensitivity
to Initial Conditions. Initial inputs to a complex system can cause the system to react in unpredictable (and nonlinear) ways. Using exactly the same or only slightly different variables in a model will not result in the same outcomes in a complex system. A sister concept is the law of
increasing returns, such as Metcalfe's law (the value of a network is proportional to the square of the connected users.)
- Time
Irreversibility. In a complex system, there is never the same context twice. For example, this is one of the challenges of quality management, in that "you never step in the same
river twice."
- Strange
Attractors. Attractors are like the influence of gravity, sets of values
to which a system migrates over time. Understand that organizations have
"attractors" that cause the behavior of the organization to migrate over time. Guy Kawazaki in his phenomenal book "Rules for Revolutionaries" referred to some attractors as "death traps" for businesses.
- Fractal
Forms. A fractal is any curve or surface that is independent of scale. This is often referred to as "self-similarity,"where any segment, if magnified in scale, appears identical to the whole curve. In business we could say that different levels of an organization
resemble or echo others.
- Bifurcation.
Bifurcation is the sudden appearance of qualitatively different solutions to
the equations for a nonlinear system as a parameter is varied. In a complex adaptive system, this can explain why different solutions emerge from different groups within an organization. This can be a key tool for innovation and creativity for an organization.
- Complex
Adaptive Systems. Rather than control an organization, management should
install feedback systems in the organization in order to “encourage those
activities that would tend to accomplish a goal, or discourage those activities
which would tend to detract from a goal. Understand the long-term behavior of an organization is unpredictable. Do not believe for a moment the arrogance of
predicting an outcome.
