Complexity Management : ppt

8/10/2019 Complexity Management : ppt

1/19

David Levy


2/19

Muhammad Taimur

Shams Uddin

Nighat Saif

Safia Zeb

Mustafa Kakakhel


3/19

To provide theoretical framework for dynamic

evolution of industries

To provide application of Chaos theory in strategicmanagement

To provide implication of Chaos theory for

managerial purposes


4/19

Strategic management lacks theoretical tools to predict thebehavior of firms and industries.

Industries evolve dynamically overtime due to actors

interactions.

Existing theories assume simple linear relationships withoutfeedback.

Chaos theory provides useful conceptual frameworkaccommodating the non linear complexity.


5/19

Chaos theory is the study of complex, non linear dynamicsystems.

Butterfly effect

E.g. pendulum suspended between magnets

Tiny variations in initial position magnifies and results in

chaotic behavior.

Predictability short term vs. long term


6/19

Industries are assumed to be dynamic, complex and

non linear systems.

Interdependency of firms and industrial actors

Industries are non linear and are path dependant

So industries behave as chaotic systems


7/19

1. Long term planning is very difficult

Smaller disturbances in initial state multiplies over

time

Future forecasting is difficult due to complexity and

non linear relationships.

Business should not spent on forecasting and strategic

planning


8/19

2. Industries do no reach stable equilibrium

Traditional theories tries to reach stable equilibrium

while equilibrium is not possible in chaotic system

Industries do not settle down and stability is not long

lasting

E.g. Prices and investment patterns are short lived


9/19

3. Dramatic change can occur unexpectedly

Traditional theories suggest that small changes inparameters bring small changes in equilibrium

Dramatic fluctuations occur internally in chaoticsystems.

Characteristic of probability distribution in chaoticsystems.

Small exogenous changes may also bring magnifiedfluctuations.

E.g. New entrants or small change in technology


10/19

4. Short term forecasts are possible

Long term forecasting is difficult while short termforecasting is possible

This is because of the presence of patterns and fractals

The accurate models of complex system with carefullydrawn initial points help in short term prediction

Chaotic systems shows repetitive patterns helping inforecasting


11/19

General guidelines are required since fixed strategiescannot be formulated for every scenario

Firms change their strategies as industrial structures

evolve

Best strategies are those which achieve their goals evenindirectly.

So we need dynamic strategies for coping withcomplexity and uncertainty


12/19

A model based on California Computer Technology is

presented

This model demonstrates how chaotic theory can helpin understanding real managerial issues

Supply chain as complex, dynamic and non linear

system.


13/19


14/19

Two important dimensions

1. Uncertainty

Each stage is exposed to shocks

Finished products fluctuate in volume to thisuncertainty

The inventory need to be adjusted to cope with thisuncertainty


15/19

2. Time Relationship

Disruption in one stage causes changes in other parts of

the system

These disruption propagate forward and backward

along the chain

This disruption causes chaos within the supply chain


16/19

Managers should make accurate sale forecasts to reduce

cost of offshore manufacturing

Managers should deal with external factors like suppliers

Managers should reduce the occurrence of internal

production problems

Managers should change the structure of supply chain

accordingly


17/19


18/19

Chaos theory highlights the importance of guidelines

formulation for coping with complexity

Underestimating complexity may result inunanticipated costs

Management might reduce the volatility of supply

chain and improve its performance


19/19

Thank You

Documents

Complexity Management : ppt