Advanced Strategic Thinking; How to Apply Chaos and Complexity Theories in Strategy?
Advanced strategic thinking; how to apply chaos and complexity theories in strategy?
In order to answer this question, an explanation of the terms ‘strategy’, ‘chaos theory’ and ‘complexity theory’ is needed.
Strategy
One of the best definitions of strategy is provided in Ghemawat's book "Strategy and the Business Landscape" is a quote from Alfred D. Chandler, Jr: “Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals”.
To complement this definition, Johnson and Scholes define it as follows: “Strategy is the direction and scope of an organization over the long term: which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets and to fulfill stakeholder expectations”.
The principal of strategy is very well described in Michael Porter’s Activity System. According to Porter, “strategy is the creation of a unique and valuable position, involving a different set of activities”. This means that strategy is about combining activities in order to create fit between an organization’s activities. Strategic fit creates competitive advantage and superior profitability.
Also Porter states that an organization has to make choices in what business it is in and who its customers are: “the essence of strategy is choosing what not to do”.
Since strategy is always a combination of analytical thinking and intuition, there is no magic set of knowledge that can help managers to create the perfect strategy.
Chaos Theory
Chaos theory looks at how very simple things can generate very complex outcomes that could not be predicted by just looking at the parts by themselves.
The theory attempts to explain the fact that complex and unpredictable results can and will occur in systems that are sensitive to their initial conditions.
In order to answer this question, an explanation of the terms ‘strategy’, ‘chaos theory’ and ‘complexity theory’ is needed.
Strategy
One of the best definitions of strategy is provided in Ghemawat's book "Strategy and the Business Landscape" is a quote from Alfred D. Chandler, Jr: “Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out those goals”.
To complement this definition, Johnson and Scholes define it as follows: “Strategy is the direction and scope of an organization over the long term: which achieves advantage for the organization through its configuration of resources within a changing environment, to meet the needs of markets and to fulfill stakeholder expectations”.
The principal of strategy is very well described in Michael Porter’s Activity System. According to Porter, “strategy is the creation of a unique and valuable position, involving a different set of activities”. This means that strategy is about combining activities in order to create fit between an organization’s activities. Strategic fit creates competitive advantage and superior profitability.
Also Porter states that an organization has to make choices in what business it is in and who its customers are: “the essence of strategy is choosing what not to do”.
Since strategy is always a combination of analytical thinking and intuition, there is no magic set of knowledge that can help managers to create the perfect strategy.
Chaos Theory
Chaos theory looks at how very simple things can generate very complex outcomes that could not be predicted by just looking at the parts by themselves.
The theory attempts to explain the fact that complex and unpredictable results can and will occur in systems that are sensitive to their initial conditions.