competing on the edge
TRANSCRIPT
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TowardsCompeting on the Edge of Chaos
Dr. Llewellyn B. LewisDr. Llewellyn B. LewisMarch 2007March 2007
THE STRATEGIC FORUMTHE STRATEGIC FORUM
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Studium Ad Prosperandum
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Studium Ad Prosperandum
Voluntas in Conveniendum
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Reg. No. 2002/105109/23
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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
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SELF-DIRECTED SELF-DIRECTED TRANSFORMATIONTRANSFORMATION
CRITICAL MESSRISKRUDE AWAKENING
CHAOSUNCERTAINTY
FIRST CURVE
SECOND CURVECREATING THE FUTUREIMPOSSIBLE RESULTS
EMERGENCESTRANGE ATTRACTORS
(Based on Handy : 1994)
THE BUTTERFLY EFFECT
THE EDGE OF CHAOS
THETHEEDGE OF CHAOSEDGE OF CHAOS
COMPLEXITYCOMPLEXITYFIELD THEORYFIELD THEORY
ZONE OF ZONE OF CREATIVITY CREATIVITY
AND ADAPTABILITYAND ADAPTABILITY
ENVIRONMENTAL CHANGE
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The Question ?
Which approach is better -----
improving what is ,or
creating what isn’t ?
THE ANSWER
YES!(Handy : 1994)
THE EDGE OF CHAOS
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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
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INDUSTRY AND COMPLEXITYTHE EDGE OF CHAOS
(Source: Fortune, 11 September 2006)
Larry PageLarry PageSergey BrinSergey Brin
Eric SchmidtEric Schmidt
““We’re willing to tolerate ambiguity We’re willing to tolerate ambiguity and chaos because that’s where the and chaos because that’s where the
room is for innovation.”room is for innovation.”
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INDUSTRY AND COMPLEXITYTHE EDGE OF CHAOS
(Source: Based on Johnson and Scholes: 2002)
First curve
Second curve CreativityEmergence
CreativityEmergence
Intuitive capacity Permeable boundaries
Mind forged MANACLES
Status Quo
FutureCHAOSChallenge the
Mindsets.
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COMPLEXITY AND STRATEGY
Miller on the Baltimore Waterfront. His Idea Factory, Legg Mason Inc
is in the background.
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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)
We deduce that it can be used to explain the dynamics of the Property Market
Inter alia, that it is a deterministic non linear system in a stage of bounded instability displaying highly complex
behaviour 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
COMPLEXITY AND STRATEGY
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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
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Competing on the edge rests on the assumption that the marketplace is in constant flux. The assumption of static equilibrium no longer applies. Rather the view is that competitors come and go. Markets emerge, close, shrink, split, collide and grow. Today’s collaborators are tomorrow’s competitors . . . or both. Technology is constantly shifting. Getting to the market early matters. In complexity parlance, the marketplace is a continuously deforming landscape. The image of this kind of landscape is of a terrain richly contoured by peaks and valleys. And it is continuously reshaped by warp-speed change.
COMPETING ON THE EDGE
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The second assumption is that firms are composed of numerous parts or agents, or businesses. When these parts are linked together at the edge of chaos and time, they form complex adaptive systems. These systems are complex not because they are complicated. They are actually fairly simple. Rather, “complex” describes the complicated, innovative and self-organised behaviour that emerges from them. They are adaptive because they can change effectively.
COMPETING ON THE EDGE
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The key assertion is that successful firms in fiercely competitive and unpredictably shifting industries pursue a competing on the edge strategy. The goal of this strategy is not efficiency or optimality in the usual sense. 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. Ultimately it means engaging in continual reinvention.
COMPETING ON THE EDGE
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PresentPast Future
The Edge of Time
Chaos Edge of Chaos Structure
The Edge of Chaos
(Source: Brown and Eisenhardt: 1998)
COMPETING ON THE EDGE
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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
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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)
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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)
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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)
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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)
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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