"The flapping of a butterfly's wings in Brazil may make the difference between calm weather and a tornado in Texas next month."
In a shrinking world, enabled by technology and typified by increasing degrees of integration across industries and regions, relationships are stronger and the cascading effect of a small change is enormous in terms of both magnitude and speed. In such a scenario where the future is unpredictable and the environment turbulent, the postulates of traditional strategic thinking become increasingly anachronistic. There is hence a need for a whole new paradigm that incorporates this uncertainty. Chaos theory provides one such platform. It suggests that complete and accurate information (necessary for rational decision-making) is unobtainable and the past is not an accurate guide to the future.
This article attempts to build a case for the application of 'chaos thinking' to business strategy. It identifies the key drivers of success in such an environment and goes on to develop a framework using which firms can hope to meet the challenges of a turbulent environment.
What is Chaos Theory?
Chaos theory studies complex and dynamic systems to reveal patterns of order out of seemingly chaotic behaviors. These chaotic systems are characterized by excessive sensitivity to initial conditions. It is based on the premise that there exists a non-linear relationship between causes and effects, which implies that tiny causes can lead to big effects making it hard to predict the outcome of a change.
The principles of chaos theory have been successfully used to describe and explain diverse natural and artificial phenomena such as predicting epileptic seizures and financial markets, modeling manufacturing systems, and making weather forecasts. In a scenario where businesses operate in a turbulent and unpredictable environment, the tenets of chaos theory can be extremely valuable. These are...