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Strategy out of Chaos Webster University Leiden, 8 April 2002.

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1 Strategy out of Chaos Webster University Leiden, 8 April 2002

2 Henk Hogeweg MBA  Field of work: strategy and change management  Consulting and Interim Management  One of the initiators of a society thinking about Chaos Theory and Complexity  Management Book Reviews for  Co-author ‘In Control with Chaos’ and ‘Consulting with Chaos’  Author of ‘Professionals & Interim Management’  Overmars Organisatie Adviseurs in De Bilt

3 How do YOU draft strategy?  Started spontaneously by a small group of people  A pattern develops in time as a result of the internal system structure  Strategy grows from the search for the solution of a random problem  That what has happened gets (new) meaning afterwards and that’s called the strategy  Strategy consists of a lot of self-fulfilling prophecy (action-reaction-action-reaction-etc.)  Drafting strategy is difficult. You can’t predict future human behavior and hear drivers  In spite of the complexity and unpredictability our collective organizational behavior appears to be rather predictable over time because of the patterns we seem to follow  As ‘outside’ the hectic increases we have to organize ourselves more loose to absorb the hectic. That’s why our own behavior sometimes is so incomprehensible and unpredictable  We are self-designing  In the end we all depend on the improvisation capacity of our people  Thought up and worked out upfront by a group  Originates explicitly by forces from outside the organization  Strategy is developed by a group of employees depending on each other and with a common goal  Strategy is the result of the widely spread wished future state  Change of strategy is adjusting to changes environmental variables  Drafting strategy is a useful activity. Most of the time the predictions become reality  The complexity of live makes it necessary to change the organization radically every few years. In that way our organizational behavior is unpredictable  As ‘outside’ the hectic increases we have to be more in control to find the right answers collectively. That makes our behavior predictable  We decide on the next step using environmental variables  As we disciplinary execute the planning and control cycle everything will be OK

4 What is Strategy? (Karl E. Weick)

5 Article Henry Mintzberg (NRC 4 maart 2000) Drafting strategy is like pottery Is business a poker game or just doing the best you can everyday? There is something in the air Sometimes a strategy is brilliant. Sometimes it’s like muddering on when totally unexpected and unprospected a unique Possibility pops up. Often the genius is brought in Afterwards.

6 Intelligent bees and stupid flies ’Let’s say, you put the same number of bees and flies in a bottle. You put the bottle horizontal with the bottom turned to the light. The bees think they are smart. They know from their hive-experience (= best- practices) that the way out is there where the light comes from. So they swarm to the bottom of the bottle and keep on trying to get out there (= more of the same). The non-programmed, stupid flies know nothing about this and are just flying around. Within five minutes all flies have found the way out of the bottle while the bees are still trying the bottom and die of hunger and exhaustion. The problem is that we have too many bees drafting strategy and not enough flies’ (Henry Mintzberg in NRC 4 maart 2000, page 16)

7 The conventional method Planning & Control cycle (De Wit – Meyer)

8 Strategy (by Mintzberg) Realized strategy Intended strategy Unrealized strategy Emergent strategy Deliberate strategy

9 What’s strategy about according to Mintzberg?  creativity  intuition  persevere  open mind  coincidence  learning capacity

10 Resourced bases school Complex / Chaotisch Simple / Rational Complex / Chaotic Environment / Simple / Rational designschool entrepreneurial school organizational action school organisational learningschool planningschool positioningsschool chaosschool incrementalist school more emergent more deliberate Strategy Schools

11 the experts speak:  ‘We don’t like their sound. Groups of guitars are on the way out.’ (A Decca Records co-executive about The Beatles in 1962).  ‘The phonograph... is not of any commercial value.’ (Thomas Alva Edison, the inventor himself in 1880).  ‘There is no reason for any individual to have a computer in their home.’ (Ken Olson, president, Digital Equipment Corporation in 1977).

12 Re-formulating Here & Now (internal zapping) STRATEGY IS: The future has started today!

13 Dilemma’s Choosen dilemma complex paradoxal situation alternative 1alternative 2 Value system 1 Value system 2 Various alternatives based on values between which a tensed relationship exists that can hardly,or even impossibly, be combined.

14 Examples of dilemma’s Business: Should say goodbye to my biggest customer? Do I really want this merger or alliance? Will my son take over the business? Do I have the guts to re-design the main process? Do I have the guts to change? (between the ears) Personal: Should I keep this job or take the other? Do I want to start my own business? Which of the kids will be general manager? Study or work? Do I have a life of my own? Am I connected?

15 Elements of Chaos Thinking CONCEPTS Self-organization and planning Intuition and embodied knowledge Coincidence Profound understanding Rich environment Paradigm and internal zapping CONTEXT Factors (McDonaldisation) and Actors

16 3/4 1/2 V ? 3/4 H/V H 1/2

17 Paradigm  A set of pre-assumptions, built up in our history, which we use in every new situation we have to deal with.  A lens which we use to look at the world and that determines what we see and experience.  A (personal) set of assumptions and pre-occupations about life and the world, most of the time under the level of our consciousness and thus seldom discussed.  The result of shared experiences in the past, recognized in our behavior, with what we automatically (without thinking) do complex tasks.

18 Prahalad: ‘The dominant logic’ Aspects of “Organizational intelligence” DATADATA Reinforced behavior Measures of performance Values & Expectations Competitive strategy Analytics and dominant logic Aspects of “Organizational learning”

19 Complexity at the dinner table About setting the table About eating About chaos About taste About organizing About daily work About change About patterns About strategyAbout shopping

20 What can we learn from that?  Chaos = lots of short stories,  that have a hidden structure and  influence each other.  So, everything is connected with everything.  Behavior is unpredictable, but not random  Renewal starts with letting existing structures (also between the ears) go.

21 Learning points homevideo (self-organization)  Big changes start small  Fundamental changes are not designed upfront, but appear to be good strategies afterwards  In the details you recognize the big  The idea (intuition) goes ahead of thinking  Change is a different way of looking (internal zapping, choosing a context)  The future has already started (self-organization)

22 Evolution Golf I: Golf II: Level and character of growth and change Time window of starting points

23 Changing phases It’s a bit of luck and choosing the right context

24 Co-creation & evolution Golf I: Golf II: Level of system functionality Time CTS S S FFS TC dilemma

25 Golf I: Golf II: Character and level of growth and change; Level of system functionality Time III IIIIV (best practices) Window of starting points (self-organization)

26 1.Define the axes with the dominant and the weak underlying values 2.Name the windows - Horizontal = acting:. Left = stay. Right = move - Vertical = thinking. Up = current thinking. Under = new thinking Old acting New thinking Old thinking New acting Defining the underlying values in the window of starting points

27 From scenario’s to strategy Scenario 1Scenario 2Scenario 3Scenario 4 New Strategy Consequences 1 Consequences 2 Consequences 3 Consequences 4 Strategy evaluation

28 Consequences for the control cycle Measuring with two measures

29 Wrap up (Co-creation) Contexts Thinking Live Contexts Thinking Live

30 Conclusion of our little research  Right: the design school  Left: the chaos school  Definition of Strategy according to me the (learning of) re-formulating Here & Now


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