Complexity Adaptive Theory (Chaos Theory)

are those

" which individual elements, parts or agents interact, then process information and adapt their behavior to changing conditions. Immune systems, ecosystems, language, the law, and the Internet are all examples..."

Michael Shermer, 2008

This system has 9 distinctive characteristics, ie

i. self-organising (re-organising itself in harmony with the environment)

ii. bounded instability (systems exist only at the edge of chaos in a zone of instability that falls between order and chaos)

iii. emergent (the system is larger than the sum of the parts)

iv. holistic (systems have no internal boundaries, no recognisable separate part. Each part is linked with every other)

v. adaptive (systems not only learn as they go, they create themselves to explore their future, ie in a mutually self-creative dialogue with the environment to which they are internally sensitive)

vi. evolutionary mutations (mutations play a creative role)

vii. destroyed by outside control (imposing outside control will destroy the internal order and balance of the systems)

viii. recontextualising (continually reframing and relearning based on experiences with the environment)

ix. order out of chaos (systems continually create order out of chaos, ie negative entropy)

There is increasing discussion on the value of on-line video/computer games. Some are claiming that they are teaching the skills required for the way organizations are heading, ie

"...self-organisation and self-regulation "rapid-fire decisions based on multiple and constantly shifting inputs..."

Emma Connors, 2006a

The traditional hierarchical concept of management (control and command, and top-down directive style) is changing in favour of a more fluid, flexible, co-operative, collaborative and adaptive structure, such as the virtual organisation. The autocratic, aloof, status-conscious, competitive, convergent-thinking, left brain-dominated style of executive will increasingly be less of a force in senior management. Attributes of leadership will be less associated with "personal charisma" and more to being in tune with staff needs and development and to embodying divergent thinking. In other words,

"...The new reality is that in this changing environment a top-down, hierarchical, compartmentalised, control-oriented management culture simply will not work. It is too slow, too rigid, too far removed from the customer, too insensitive to feedback, and the layers of bureaucracy required by the hierarchy are too costly. The management system needed in this new era sees that the various elements of the system are interdependent and must function as an integrated whole. The entire system needs to be highly responsive to the customer and marketplace feedback, with the organisation being very flexible.

Here, knowledge and the ability to solve problems no longer flows down from the top of the organisation, far removed from the customer. The best source of knowledge comes from where the work gets done, not from the top. Knowledge and wisdom are not resident in the upper offices, and power is not derived from position or control.

The role of employees has shifted from one where individual differences need to be suppressed to one where individual differences - knowledge and skill - are the firm's most essential competitive advantage.

So, today's executives are responsible for guiding the work of much more amorphous, flexible, distributed networks of core competencies that must be bought together with speed and fluidity to meet the needs of rapidly changing markets, often using technologies with life cycles shorter than the products or services offered..."

Harold Resnick, 2006

Furthermore, need to be careful of the popularity of exalted leadership. Based on the exalted leadership model

"...the three greatest leaders of the 20th century were Hitler, Stalin and Mao. If that's leadership, I want no part of it..."

Peter Drucker as quoted by Geoffrey Colvin, 2005b

Leadership (including decision-making) is very contextual and situational. One style of leadership is not suitable for all situations. For example, an entrepreneurial leadership style is most appropriate for an escalating research and development organisation, whereas a motivational style is more suited to a product launch environment. On the other hand, good leaders have the following characteristics

- self-awareness (know their strengths and weaknesses plus those of people around them)

- do the right thing (are not interested in popularity)

- are good role models

- have an understanding and appreciation of the current environment that working in

As Snowden et al, 2007 observe, effective leaders learn to modify their decision-making styles to match changing environments. Using the 4 different situational contexts (described as simple, complicated, complex and chaotic) calls for different managerial responses (there is a description of the 5th context at the bottom of the table). Managers need to correctly identify the governing context, be aware of danger signals, and be able to avoid inappropriate reactions, ie



Leader's job

Danger signals

Responses to danger signals


(the domain of best-practice) eg areas little subjected to change, such as process "oriented situation"

Repeating patterns and consistent events

Clear cause-and-effect relationships evident to everyone; right answer exists

Known knowns

Fact-based management

Sense, categorize and respond

Ensure that proper processes are in place


Use best practices

Communicate in clear, direct ways

Understand extensive interactive communications may not be necessary

Complacency and comfort

Designed to make complex problems simple

Entrained thinking*ii

No challenge of accepted wisdom

Over-reliance on best practice if context shifts

Create communication channels to challenge orthodoxy

Stay connected without micromanaging

Did not assume things are simple

Recognize both the value and the limitations of best (past) practice

Complicated (the domain of experts)

Expert diagnosis required

Cause and effect relationship discoverable but not immediately apparent to everyone; multiple right answer possible

Known unknowns

Fact-based management

Sense, analyse and respond

Create panels of experts

Listen to conflicting advice

Use good practice

Experts locked into entrained thinking*ii that can cause analysis paralysis

Expert panels

Viewpoint of non-experts excluded

Encourage external and internal stakeholders to challenge expert opinions to combat entrained thinking

Use experiments and games to force people to think differently

Complex (the domain of emergence)

Most firms in this context

Constant flux and unpredictable

No right answers; emergent instructive patterns

Understand why things happen in retrospect

Unknown knowns

Many competing ideas

A need for creative and innovative approaches

Adaptive leadership

Probe, sense and respond

Create environments and experiments that allow patterns to emerge, ie experimental understanding

Increased levels of interaction and communication

Use methods that can help generate ideas: open discussion (as to large group methods); set barriers; encourage dissent and diversity; manage starting conditions and monitor for emergence

Temptation to fall back into habitual, command-and-control mode

Temptation to look for facts rather than allowing patterns to emerge

Desire for accelerated resolution of problems or exploitation of opportunities

Be patient and allow time for reflection

Use approaches that encourage interaction so patterns can emerge

Chaotic (the domain of rapid response), such as 9/11

High turbulence

No clear cause-and-effect relationships, no one right answer


Many decisions to make and no time to think

High tension

Adaptive leadership

Act, sense and respond

Look for what works instead of seeking right answers

Take immediate action to re-establish order (command and control; crisis management)

Provide clear, direct communications.

People more open to new ways of doing things, ie innovation

Applying a command and control approach longer than needed

"Cult of the leader", ie legends in their own minds

Missed opportunity for innovation

Chaos unabated

Setup mechanisms, such as parallel teams, to take advantage of opportunities afforded by chaotic environment

Encourage advisers to challenge point of view once the crisis has abated

Work to shift the context from chaotic to complex


i) Each context requires different actions. Simple and complicated contexts exist in an orderly universe, where cause-and-effect relationships are perceptible and right answers can be determined based on the facts. Complex and chaotic contexts are unordered - there is no immediate apparent relationship between cause and effect, and the way forward is determined based on emerging patterns. The ordered world revolves around fact-based management; the unordered world requires adaptive leadership.

ii) Entrained thinking refers to being overconfident in solutions or in the efficacy of solutions based on past experience, training and success

NB There is a 5th context (disorder) that applies when it is unclear which of the other 4 contexts are predominant. There are multiple perspectives jostling for dominance; factional leaders are in dispute; discord reigns. This requires breaking the situation into its constituent parts and assign each to one of the other 4 contexts; then make decisions on the intervention in contextually appropriate ways

The role of senior executives and leadership is to take responsibility for creating a supportive environment for staff activities such as new product development and meeting future challenges, being creative and innovative, etc. In effecting the change, senior management needs to mobilize people throughout the organisation to do adaptive work. This is required when:

- our deeply-held beliefs are challenged

- the values that made an organisation successful become less relevant

- legitimate competing perspectives emerge.

Creating the supportive environment is of the utmost importance, as the dominant resource/asset is now knowledge, ie intellectual property. As knowledge is not a physical asset which organisations can own, the best organisations can do is to create an environment which makes the best people want to stay with the organisation. Generally the more open the physical environment, the more open the organisation (Sheridan Winn, 2007). On the other hand, people are territorial.

More managers are moving away from concentrating on how (how we do things, how we operate) to what (what opportunities to pursue, what partnerships to form, what technologies to back, what experiments to start, etc)

On the other hand, with the prediction of an economic 'slow down', there will be increased pressure for managers to revert to more command and control types of management with pressure to perform in the short term.

Inflexible budget considerations are now being perceived as part of the command and control culture, ie a process that dis-empowers the front line staff, discourages information sharing and can slow the response to market development. Consequently, some organisations are moving away from budgets. In some extreme cases, when budgets are used as part of performance criteria, this has led to the breakdown of corporate ethics. Budgeting can do damage

- because it relies upon necessarily obsolete data

- much time is wasted on protracted, self-interested wrangling about the data that will supposedly indicate the future

- it encourages a system or philosophy of "spend it or lose it"

- much time and effort is spent supervising the organisation's performance in relation to the budget

- rigid adherence to annually-fixed plans and budgets stifles innovation

Some organisations claim that the budget process absorbs up to 30 percent of management's time. Furthermore, conclusions can be rendered pointless by new market information after the budget is completed. Alternatives to budgets include using measures, some financial (such as cost-to-income ratios, return on capital, profits, cash flow, cost reductions, etc); some non-financial and operational (such as time-to-market, customer satisfaction, quality, etc) and benchmarking to compare performance both within the organisation and externally. Generally, this approach has resulted in business units becoming smaller, more numerous and more entrepreneurial, ie a more adaptive organisation.

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