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Leading in an increasingly complex environment

Businesses today operate in an increasingly volatile environment. Coping with the complexity of today's business environment is not just about imagining the future or mitigating risk; it is also about

G R Chandrashekhar 

Leading in an increasingly complex environment

Strategic thinking in the past few decades has been largely driven by tools and paradigms from economics and its sub disciplines. Such an approach has facilitated acute understanding of positional power in terms of developing and retaining competitive advantage and the competencies required to be flexible and create new products and services for firms and However, strategy development and execution has undergone significant change in the past decade-and-a-half as are subject to multiple influences not only from within their sectors of business, but also from converging technology trends, rapidly changing customer demands, increasing state actions in terms of deregulation, stake sale, privatisation to name a few, and increasing effect of a connected globalised economy. Thus the earlier understanding based on creating positional power to be profitable is no longer tenable and businesses need to seek out newer approaches for survival, growth and profitability.

Newer approaches to achieve competitive advantage would rely on data, use nonlinear models and be inter-disciplinary in nature to try and comprehend the large data that could be available on customer trends, economic indicators, global trade swings, international policy decision impacts, local regulatory issues and so on. This would lead the very nature of analysis to look for deep-seated patterns from seemingly unconnected events, ferret out influences from deep mining of data, and integrate these insights into tangible indices. These indices would then constitute a dashboard for use by senior managers to navigate through uncertain business landscape. This is the expectation from complexity science.

How could businesses benefit from complexity science?

Businesses could benefit in three broad ways by harnessing the power of complexity science.

  • Derive deep insights from large datasets: Advanced data-mining techniques could be used to develop deep insights from customers, suppliers, macro-economic indicators, industry factors, country issues and others. The continuous stream of data could be mined to understand the usage pattern, component behaviour under different conditions of usage and other aspects one may be interested to know for preventive maintenance and future product innovation.
  • Map influences that could unravel uncertainty: Event flow mapping approaches could be used to map the key issues within and without to arrive at possible intervention points for them to move to a high growth trajectory.
Like in the case of deriving deep insights, event flow mapping is a continuous process and once institutionalised, would provide deep insights into the flow of events, their likely impact, leading to the opportunities that become available and the threats that would need mitigation. Both of these approaches could be used at business/functional levels that could be integrated for use at the corporate level.

  • Develop organisational indices: The insights from data flow, as in the case of the first approach, and insights from the events flow as in the case of the second approach could be combined to develop multi-dimensional indices for use at the corporate level. The different dimensions could be economic, financial, product related etc. obtained from data flow and political, environmental, regulatory and local issues from events flow.
Some examples of the multidimensional indices that would be of use to organisations could be diversity index, complexity index and value creation index. A product diversity index could not only provide insight into product penetration, profitability, ageing, competitiveness etc. but also provide insights into potential "take off" points for future growth, and potential "sinks" for future profitability. Such indices allow managers to develop or recalibrate their short- and medium-term strategies and continuously find newer and smarter ways of execution.
The author is Associate Professor, Strategy, Complexity Research Group, IFMR, Chennai

First Published: Mon, November 02 2015. 00:07 IST