David Levy presented his idea about Complexity management , chaos theory and how this theory could be applied and help managers

1. David Levy

2. Muhammad Taimur
Shams Uddin
Nighat Saif
Safia Zeb
Mustafa Kakakhel

3.  To provide theoretical framework for dynamic
evolution of industries
 To provide application of Chaos theory in strategic
management
 To provide implication of Chaos theory for
managerial purposes

4.  Strategic management lacks theoretical tools to predict the
behavior of firms and industries.
 Industries evolve dynamically overtime due to actors’
interactions.
 Existing theories assume simple linear relationships without
feedback.
 Chaos theory provides useful conceptual framework
accommodating the non linear complexity.

5.  Chaos theory is the study of complex, non linear dynamic
systems.
 Butterfly effect
 E.g. pendulum suspended between magnets
 Tiny variations in initial position magnifies and results in
chaotic behavior.
 Predictability short term vs. long term

6.  Industries are assumed to be dynamic, complex and
non linear systems.
 Interdependency of firms and industrial actors
 Industries are non linear and are path dependant
 So industries behave as chaotic systems

7. 1. Long term planning is very difficult
 Smaller disturbances in initial state multiplies over
time
 Future forecasting is difficult due to complexity and
non linear relationships.
 Business should not spent on forecasting and strategic
planning

8. 2. Industries do no reach stable equilibrium
 Traditional theories tries to reach stable equilibrium
while equilibrium is not possible in chaotic system
 Industries do not settle down and stability is not long
lasting
 E.g. Prices and investment patterns are short lived

9. 3. Dramatic change can occur unexpectedly
 Traditional theories suggest that small changes in
parameters bring small changes in equilibrium
 Dramatic fluctuations occur internally in chaotic
systems.
 Characteristic of probability distribution in chaotic
systems.
 Small exogenous changes may also bring magnified
fluctuations.
 E.g. New entrants or small change in technology

10. 4. Short term forecasts are possible
 Long term forecasting is difficult while short term
forecasting is possible
 This is because of the presence of patterns and fractals
 The accurate models of complex system with carefully
drawn initial points help in short term prediction
 Chaotic systems shows repetitive patterns helping in
forecasting

11.  General guidelines are required since fixed strategies
cannot be formulated for every scenario
 Firms change their strategies as industrial structures
evolve
 Best strategies are those which achieve their goals even
indirectly.
 So we need dynamic strategies for coping with
complexity and uncertainty

12.  A model based on California Computer Technology is
presented
 This model demonstrates how chaotic theory can help
in understanding real managerial issues
 Supply chain as complex, dynamic and non linear
system.

14.  Two important dimensions
 1. Uncertainty
 Each stage is exposed to shocks
 Finished products fluctuate in volume to this
uncertainty
 The inventory need to be adjusted to cope with this
uncertainty

15.  2. Time Relationship
 Disruption in one stage causes changes in other parts of
the system
 These disruption propagate forward and backward
along the chain
 This disruption causes chaos within the supply chain

16.  Managers should make accurate sale forecasts to reduce
cost of offshore manufacturing
 Managers should deal with external factors like suppliers
 Managers should reduce the occurrence of internal
production problems
 Managers should change the structure of supply chain
accordingly

17.  Chaos theory provides conceptual framework for the
dynamic evolution of industries
 Long term forecasting is almost impossible for
chaotic systems
 However short term forecasting is possible
 Dramatic changes can occur unexpectedly

18.  Chaos theory highlights the importance of guidelines
formulation for coping with complexity
 Underestimating complexity may result in
unanticipated costs
 Management might reduce the volatility of supply
chain and improve its performance

19. Thank You