Daily leadership activities to leverage complexity. 13: Taking advantage of chaos

So far we discuss which daily task we should take to understand and adjust to complexity. We spend time on chaos and entropy that are elements or byproducts of complexity. My next three posts are about how to take advantage of them. If it’s the first post you are reading in my series about leveraging complexity, I encourage you to read all the previous 12 posts on my blog.

We can leverage complexity, chaos, and entropy as a competitive advantage. I will explain how you can tangibly create a competitive advantage by using each one of them. Before we’ll start with tangible points, the sheer understanding of chaos and entropy, how they operate, and their impact gives you a competitive advantage. This understanding gives you an advantage over people operating under a mental model that ignores those universal rules. I just wanted to reiterate this message.

Taking advantage of chaos

When we operate in a chaotic environment, we can’t predict how future states will turn out. If we want to understand how we reached a certain stage, we need to go step by step. Many people will ignore this understanding, and they will define a future state and strict process to be there. You should take advantage of this principle and review and adjust your goals and plane based on the current reality, which emerged out of some unplanned changes.

Set up long-term goals, like increase net profit by 50% in the next 3 years. Make sure you have dynamic strategies to get there. Review them often and make sure that based on the unplanned changes those strategies still apply. The same applies to roadmaps and projects planned to make strategies a reality. 

When you see a lot of noise instead of a clear path to reach any state, what you see is the actual system behavior and not noise. There are two options to follow when understanding that you operate in chaos. Change the social system to reduce the conditions that create chaos. Adjust your social system to operate in chaos. Most people will ignore the noise or waste time and effort to reach the wanted state. You already on top of them.

I want to share a real example. For many years, we tried to reduce people’s tendency to open phishing emails. Our goal was to minimize it to 1%, we never reached it. So we started to collect data. We collected the percentage of people that click a link, the sophistication of the phishing over time. What we found out was instead of starting with 40% of people clicking on phishing and slowly reaching the target of 1% we saw different behavior. There was an improvement toward the 1% target, but it never reached it. It went in cycles around the 1% target (around 10%). Then at some point in time, the positive trend changed to a negative change now circling around 20%.

This behavior just repeats and again but without creating any pattern. The same as the plots of the butterfly effect diagrams. Most of us thought it is the noise that we need to fix. Therefore, we added more control and fear in the system. The results were bigger differences between the negative and the positive trends. Just when we realize that this is not a noise but a chaos behavior and we adjusted the social system, we saw an improvement. We never reached 1% but we stay on a range between minus five percentages plus five percentages change. 

Chaos developed by repeating simple rules. Our bodies and other forms of life use our rules to resolve complex problems. This is how any cell in your body is at least five cells away from a blood cell, yet the entire blood system is 5% of our body. This is how ants create colonies. Humans started to use these simple rules to resolve problems. For example, by using 3 simple rules that ants follow to find food people resolve the traveler agent problem (optimal routes between several locations).

You can learn simple rules of different chaotic systems and use them to resolve your problems. They might not turn to be the best solution (there isn’t one best solution anyway in dynamic systems), but it’s a workable solution. While others are spending time and effort to use more conventional solutions, you can pop up with a solution that is already workable. Think about the impact on your bottom line if you are first in the market with a workable solution. 

If you’ll observe one ant, you won’t find any logic. The same applies to ten, a hundred or thousands of them. But, if you’ll observe hundreds of thousands of ants, you will find out a very sophisticated system that can raise fungi and learn and adjust. How? Ants can create a sophisticated system when they are following together a set of simple rules. One principle of chaos claims that what applies to one type of chaotic system applies to others.

Chaotic systems have patterns but no recurring sequence of events. This understanding, together with the fact that humans are always looking for patterns, can be used against competitors. Let your competitors believe they see patterns. Once people see patterns, they act under the assumption that they are dealing with an ordered system operating under periodical behavior. 

In reality, any business environment is chaotic. While your competitors use patterns to guide their actions, set your action knowing patterns are not a sign of periodical behavior. Create a new state that will surprise them and give you a competitive advantage.

In chaotic environments, any set of elements will eventually overlap with other sets. People are moving between companies and companies are merging all the time. It doesn’t matter how cohesive the teams you build, overtime teams will overlap and merge with other teams. In this process, every team loses uniqueness and becomes more common. 

The same applies to companies. Therefore, creating hybrid teams from the beginning is a better approach. Hybrid teams will create more efficiency for any company. Let others waste their energy maintaining cohesive teams.

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