The chaos theory deals with non-linear things that are mostly impossible to predict, calculate or control. In business, industries are complex systems, where opportunities arise due to a lack of predictability. How much do we attribute from our skills and knowledge and how much do we attribute to randomness of other components outside of our immediate environment to our results?
The fundamental problem is that industries evolve in a dynamic way over time as a result of complex interactions among firms, government, labor, consumers, financial institutions, and other elements of the environment.
David Levy released a journal, Chaos Theory and Strategy: Theory, Application, and Managerial Implications that discusses how organisations try to use finite measurements in an infinite world.
As a result, businesses operating in a state of organised chaos can end up seizing opportunities that would otherwise be missed, because of their flexibility and lack of structure.
Organised chaos suggests that management should place more emphasis on adaptability, initiative and entrepreneurial creativity to cope with a future that is inherently unknowable. The more variables we can account for, the more control we have, causing more accurate forecasting.
The downfall of operating in chaos, is the issue of being unable to forecast where the business will be in a month or a year’s time.
However, with the right staff and employees, organised chaos has the potential to be the most successful theory in business.
It is hard to determine when industries will shift and external factors will hugely impact the state of a business. The pandemic was an unforeseen event that drastically changed all industries.
For us at Black Lab Design, a manufacturing business, we began producing hand sanitisers stations to clients, and pivoting our entire business to keep Australians safe and healthy.
Our adaptability created opportunities for us, in a time of huge uncertainty.
References: Levy, David. (1994). Chaos Theory and Strategy: Theory, Application, and Managerial Implications. Strategic Management Journal, Vol. 15, 167–178