Strategy in the real world: the implications of complexity

Strategy in the real world: the implications of complexity

Traditional approaches to long term planning don’t take account of the complex and unpredictable nature of the real world of business.

Malcolm Clews from Aston Business School explains how managers should respond to complexity in order to gain a competitive edge.

It’s often assumed that the world of business works in a largely well-understood and reasonably predictable manner. Orderly causes lead to orderly effects and long-term planning is regarded as a valuable, reliable and essential aid to gaining and sustaining competitive advantage.

Consequently we use methods like analysing past and current performance and tools such as correlation and regression to determine trends. This gives us a picture of the future on which to base our long-term strategic planning.

We consider possible shocks or changes in the current environment and develop plans based on what we think will happen in the future, then combine these plans with our imperfect knowledge of: the world in which we live and do business, of our organization and the environment in which it operates, as well as the errors we make in the analysis itself.

This traditional type of analysis and planning works on the assumption that there is a direct causal link between action and outcome. But this is a simplification of the way things really are.

It’s complicated

We know from experience that an action or cause can have many different outcomes or effects. We do not know how to reliably predict behaviour or outcomes in the future in our own personal lives, much less the complicated business world.

Let’s extrapolate from this that economic systems – be they whole economies, industries or individual businesses – can be thought of as complex systems that adapt to their environment and evolve over time in ways that we cannot control.

In other words, the simple link between cause and effect does not work in the long-term future.

This has important implications for long-term, strategic thinking in business. If complex systems cannot be controlled, but evolve through a process of self-organisation from which their futures emerge, then planning for and trying to project the future is, in fact, illusory.

If it is true that we can never usefully plan or intend the long-term outcomes of our actions, just what should our response be?

Develop a creative culture

The best managers can do is to influence what might happen, by designing processes and structures that are flexible, agile and adaptable.

We should develop a culture in which people can interact and where creativity is encouraged, rather than sticking to the usual and accepted way of doing things. This will lead to innovation and change and being more able to adapt than your rivals.

In turbulent times this will potentially give you the competitive edge.

Dr Malcom Clews lectures on the Strategic Management module of the Aston MBA, an intensive programme that immerses students into the principles of strategic thinking in a business context.

The Strategic Management module introduces the main concepts and thought processes in strategic management and develops the skills needed for delivering successful business strategies.

You can study the Aston MBA online. Find out more at www.astonmba.com