The edge of chaos in data strategy

It's key to find a balance in the organization between chaos and rigitiy. In the literature this is called 'the edge of chaos'.

When you think of the problems a data consultant is solving, you might get the impression that I try to minimize chaos and uncertainty. But that's actually not entirely true. It's key to find a balance in the organization between chaos on the one hand, and rigitiy on the other. In the literature this is called 'the edge of chaos'.

The organization as organism

An organization, like an organism, comes into being, functions in a normal state, and disappears again. During its existence, an enterprise hires people to perform certain tasks, interacts with external parties and evolves in function of customer demand. In Darwin's 'The origin of species' we read how organisms develop certain strategies for survival through natural selection.

For example, to gather food more efficiently or to protect themselves against predators. A company doesn't have thousands of years to evolve through natural selection, so it needs a different way to achieve a successful strategy.

What is strategy?

Key performance indicators (KPIs) are used to measure whether predetermined strategic objectives are being effectively achieved. But what is strategy really? And how do you come up with a strategy? Much is said and written on this subject, but it is not always easy to see the forest for the trees.

As a working definition of strategy, we use Porter's 'What is strategy' (1996) to put forward the following description:

Strategy is the interplay of elements that together determine the competitive position of a company in relation to its environment.

Examples of these different elements can be the offer of certain services or products, the operational best practices around certain core competencies, the degree of flexibility in dealing with change, or the way in which a network of partners is cooperated with in order to create efficiency and win-win situations.  

By environment we mean here the competitors, the customers and suppliers, the legislative framework and in the longer term the social and environmental trends facing the company.
If we include Ovans' "What is strategy again? (2015), we see that you can divide most of the literature on strategy into three broad thrusts: grabbing a bigger piece of the pie, making the pie bigger for everyone, or grabbing a piece of the pie when the opportunity arises.

An organization as a complex adaptive system

If we look at an organization as an organism in an ecosystem, it becomes clear that a company is a complex system that is exposed to all kinds of more or less predictable internal and external influences. An organism is a type example of a complex adaptive system.

Complex systems theory studies the behavior of systems that evolve, learn and adapt. This theory provides a perspective from which firms can borrow concepts and from which they can model the dynamics they experience internally and in the marketplace. Complex adaptive systems can be described as a network of active, individual elements that interact in different ways based on internal rules, on their state at a given time, and on their experience-based strategies.

In addition, a complex adaptive system has the ability to learn and thus can adapt to the environment. Past interactions lead to experience that the system uses to revise and reorganize the elements that make it up. The lessons from the past will be used by the system to adjust its internal rules to develop a strategy for the future.

Furthermore, the system will develop a way to make predictions about the future. A complex adaptive system is an open system, and thus is in communication with the outside world. The system's predictions are based on the elements' assumptions about interactions inside and outside the system.

A valuable metaphor from complex systems theory, is the edge of chaos theory. This theory suggests that an enterprise functions best in a state between order and chaos, between randomness and rigidity. The edge of chaos is an organizational state that allows for a high degree of responsiveness, variety, creativity and vitality to be exhibited.

Implications for your strategy

Allow enough freedom in your organization, but not too much. Provide enough structure, but not too much. Be alert to certain trends within your organization and experiment with new services and products, new customer segments or distribution channels. Whatever strategy you follow, the metaphor of the edge of chaos from the complex systems theory provides a valuable insight to cultivate a certain attitude: dare to make mistakes, and learn from them. It is worthwhile to attach a KPI to this - for example, making hours available among your employees to experiment.