Surfing the edge of chaos

Every decade or two, a big idea in management thinking takes hold and becom es widely accepted. The next big idea must enable businesses to improve the hit rate of strategic initiatives and attain the level of renewal necessar y for successful execution. Scientific research on complex adaptive systems has identified principles that apply to living things, from amoebae to org anizations. Four principles-in particular are relevant to new strategic wor k, as activities at Royal Dutch/Shell demonstrate: 1. Equilibrium equals death. The lure of equilibrium poses a constant dange r to successful firms. in 1996, Shell was highly profitable, but fissures w ere forming below the surface. Downstream, Shell's oil products business fa ced grave competitive threats. Steve Miller the business's group managing d irector and a student of complexity theory, recognized that to meet those t hreats, he would have to disturb equilibrium by bypassing the resistant bur eaucracy and involving the front lines in renewal. By 1997, after a series of initiatives, Shell ranked first in share among major oil companies; by 1 998, the business had made a contribution of more than $300 million to Shel l's bottom line. 2. Complex adaptive systems exhibit the capacity of self-organization and e mergent complexity. The living-systems approach focuses on the intelligence in the nodes. To tap the retailing potential of the forecourt of Shell's s ervice stations, Miller drew on the insights of frontline troops. He assemb led teams from operating companies around the world into "retailing hoot ca mps," workshops for identifying and exploiting market opportunities. These generated many new ideas for beating the competition. 3. Complex adaptive systems move toward the edge of chaos when provoked by a complex task. Novelty emerges in the space between rigidity and randomnes s. At Shell, the coaching of country teams and the new project work that re sulted led to a more direct, informal, and less hierarchical way of working . 4. One cannot direct a living system, only disturb it. Managers cannot assu me that a particular input will produce a particular output. Miller has lea rned that "top-down strategies don't win ballgames. Experimentation, rapid learning, and seizing the momentum of success is the better approach." Whil e leaders provide the vision and establish the context, solutions to ongoin g challenges are generated by the people closest to the action.