Competing On The Edge

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The World Economy and Industries world-wide is at a bifurcation point, on the dege of the cusp. We are standing on a burning platform and the question is whether demise will follow (eg the property bubble) or whether industries cab REINVENT themslves and take a quantum leap forward. We are on the EDGE OF CHAOS and naturally it is a place for creativity, innovation and transformation. Different rules apply, for example CHAOS THEORY, FIELD THEORY and COMPLEXITY SCIENCE. It is a time when new types of transformational leadership are required. Strategies also have to draw on the complexity sciences as we learn to thrive on the edge of chaos.

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Competing On The Edge

  1. 1. Towards Competing on the Edge of Chaos Dr. Llewellyn B. Lewis March 2007 <ul><li>THE STRATEGIC FORUM </li></ul><ul><li>A place of assembly </li></ul><ul><li>for strategic conversations </li></ul>THE STRATEGIC FORUM www.strategicforum.co.za
  2. 2. No society is likely to renew itself unless its dominant orientation is to the future. This is not to say that a society can ignore its past. A people without historians would be as crippled as an individual with amnesia; they would not know who they were. In helping a society to achieve self knowledge, the historian serves the cause of renewal. However, in the renewing society, the historian consults the past in the service of the present and the future. The society capable of continuous renewal not only is oriented towards the future but looks ahead with some confidence . This is not to say that blind optimism prevails; it is simply to say that hopelessness does not make for renewal. (Gardner: 105 – 106) THE EDGE OF CHAOS
  3. 3. SELF-DIRECTED TRANSFORMATION CRITICAL MESS RISK RUDE AWAKENING CHAOS UNCERTAINTY FIRST CURVE SECOND CURVE CREATING THE FUTURE IMPOSSIBLE RESULTS EMERGENCE STRANGE ATTRACTORS (Based on Handy : 1994) THE BUTTERFLY EFFECT THE EDGE OF CHAOS THE EDGE OF CHAOS COMPLEXITY FIELD THEORY ZONE OF CREATIVITY AND ADAPTABILITY ENVIRONMENTAL CHANGE
  4. 4. The Question ? Which approach is better ----- improving what is , or creating what isn’t ? THE ANSWER YES! (Handy : 1994) THE EDGE OF CHAOS
  5. 5. WORLD CLASS ORGANISATIONS Work effectively, not just on one curve or the other, but on both, at the same time, and learning from both. (Handy : 1994) THE EDGE OF CHAOS
  6. 6. INDUSTRY AND COMPLEXITY THE EDGE OF CHAOS (Source: Fortune, 11 September 2006) “ We’re willing to tolerate ambiguity and chaos because that’s where the room is for innovation.” Larry Page Sergey Brin Eric Schmidt
  7. 7. INDUSTRY AND COMPLEXITY THE EDGE OF CHAOS (Source: Fortune, 11 September 2006)
  8. 8. INDUSTRY AND COMPLEXITY THE EDGE OF CHAOS (Source: Based on Johnson and Scholes: 2002) First curve Second curve Creativity Emergence Intuitive capacity Permeable boundaries Mind forged MANACLES Status Quo Future CHAOS Challenge the Mindsets.
  9. 9. COMPLEXITY AND STRATEGY
  10. 10. COMPLEXITY AND STRATEGY Miller on the Baltimore Waterfront. His Idea Factory, Legg Mason Inc is in the background.
  11. 11. COMPLEXITY AND STRATEGY
  12. 12. COMPLEXITY AND STRATEGY
  13. 13. COMPLEXITY AND STRATEGY
  14. 14. <ul><li>There are indications that chaos explanations give insight into the operation of foreign exchange-, stock- and oil-markets (Source: Stacey, Ralph D. Strategic Management & Organisational Dynamics. The challenge of Complexity: 2000: 259) </li></ul><ul><li>We deduce that it can be used to explain the dynamics of the Property Market </li></ul><ul><li>Inter alia, that it is a deterministic non linear system in a stage of bounded instability displaying highly complex behaviour </li></ul><ul><li>It is in a border area between stable equilibrium and explosive instability; i.e. a state of paradox in which two contradictory forces, stability and instability are operating simultaneously </li></ul>COMPLEXITY AND STRATEGY
  15. 15. At Berkshire, our carefully-crafted acquisition strategy is simply to wait for the phone to ring. (Warren Buffet) We try to think about things that are important and knowable. There are important things that are not knowable . . . and there are things that are knowable but not important – and we don’t want to clutter up our minds with those. (Warren Buffet) Circle of Illusory competence COMPLEXITY AND STRATEGY
  16. 16. <ul><li>Competing on the edge rests on the assumption that the marketplace is in constant flux. </li></ul><ul><li>The assumption of static equilibrium no longer applies. </li></ul><ul><li>Rather the view is that competitors come and go. Markets emerge, close, shrink, split, collide and grow. </li></ul><ul><li>Today’s collaborators are tomorrow’s competitors . . . or both. </li></ul><ul><li>Technology is constantly shifting. Getting to the market early matters. </li></ul><ul><li>In complexity parlance, the marketplace is a continuously deforming landscape. </li></ul><ul><li>The image of this kind of landscape is of a terrain richly contoured by peaks and valleys. </li></ul><ul><li>And it is continuously reshaped by warp-speed change. </li></ul>COMPETING ON THE EDGE
  17. 17. <ul><li>The second assumption is that firms are composed of numerous parts or agents, or businesses. </li></ul><ul><li>When these parts are linked together at the edge of chaos and time, they form complex adaptive systems. </li></ul><ul><li>These systems are complex not because they are complicated. They are actually fairly simple. </li></ul><ul><li>Rather, “complex” describes the complicated, innovative and self-organised behaviour that emerges from them. </li></ul><ul><li>They are adaptive because they can change effectively. </li></ul>COMPETING ON THE EDGE
  18. 18. <ul><li>The key assertion is that successful firms in fiercely competitive and unpredictably shifting industries pursue a competing on the edge strategy. </li></ul><ul><li>The goal of this strategy is not efficiency or optimality in the usual sense. </li></ul><ul><li>Rather, the goal is flexibility – that is adaptation to current change and evolution over time, resilience in the face of setbacks, and the ability to locate the constantly changing sources of advantage. </li></ul><ul><li>Ultimately it means engaging in continual reinvention. </li></ul>COMPETING ON THE EDGE
  19. 19. Present Past Future The Edge of Time Chaos Edge of Chaos Structure The Edge of Chaos (Source: Brown and Eisenhardt: 1998) COMPETING ON THE EDGE
  20. 20. (Source: Brown and Eisenhardt: 1998) COMPETING ON THE EDGE
  21. 21. Roll out new branches, source and develop new products, develop new markets, discover new customers, diversify. LEADING CHANGE. (Source: Brown and Eisenhardt: 1998: 23) COMPETING ON THE EDGE Building Blocks
  22. 22. COMPETING ON THE EDGE Navigating the Edge of Chaos: Improvisation Entrepreneurial and creative, visionary thinking, possibility and abundance, continuous learning, Emergent teams, self selected and self-organised, emergent strategy Simple rules, Influence rather than control, Flat structure, Strategic Conversations, COMMUNICATION (Source: After Brown and Eisenhardt: 1998: 47)
  23. 23. COMPETING ON THE EDGE Co-adaptation Networking, teamwork, alliances, joint ventures, partnerships Industry Knowledge, Local autonomy, decentralised, distributed power. Rapid response, Flexibility, Leveraging strategic capability, Unique resources, core competencies (Source: After Brown and Eisenhardt: 1998: 80)
  24. 24. COMPETING ON THE EDGE Regeneration Simultaneous first and second curve thinking; Leveraging core competencies across Business Units. Protect and build; Product enhancement; market penetration; Create services that exploit change. Respect experience; Win-win relationships; Redefine the boundaries, change the game rules, reconfigure the value chain. (Source: After Brown and Eisenhardt: 1998: 114)
  25. 25. COMPETING ON THE EDGE Experimentation Creativity and innovation; explore opportunities within context of strategic intent Strategise to intercept the future, Market development, product development, diversification. Exploring the future, emerging strategy, Reinvention and transformation (Source: After Brown and Eisenhardt: 1998: 149)
  26. 26. The ever renewing organisation (or society) is not one which is convinced that it enjoys eternal youth. It knows that it is forever growing old and must do something about it. It knows that it is forever producing deadwood and must, for that reason, attend to its seedbeds. The seedlings are new ideas, new ways of doing things, new approaches. (Gardner: 1981: 68) COMPETING ON THE EDGE
  27. 27. TO REINVENT THE LEADERSHIP FIRST THEN THE ORGANISATION THEN THE INDUSTRY Leaders make the impossible happen The challenge is

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