TEDActive 2012. February 27 - March 2, 2012 Palm Springs, CA. Photo: Michael Brands

Better Strategy Through Chaos

Humans organize. We create rules. Those rules are inevitably broken, and then we create rules for dealing with the broken rules. At its most formal, it’s called the legal system.

People deal with chaos, randomness, and emotions by creating procedures, systems, and laws. We have a deep desire to create order. In many instances, we ignore reason and fairness - the very things we seek - to maintain a sense of order. Think of the complexity of the American school-to-prison pipeline. Authorities double down on punishment for disadvantaged children who need the most help escaping a cycle of poverty and violence… which perpetuates a broken system and creates more social strife. We sacrifice reason and fairness for a sense of order.

In business, we deal with the same chaos, randomness, and emotions by creating procedures, systems, and laws. We have rules around everything: contracts, payments, employee rights, holidays, hiring and firing, etc. We develop operating procedures for every imaginable scenario, including planning for an unknowable future.

And that’s where we go wrong.

While systems work for knowable and predictable inputs, business is not a science of those inputs. To be sure, some operations like compliance are based on running the machine by following the rules. But business is largely about breaking the rules.

Take the examples of Airbnb and Uber. At their core, those businesses were created by breaking rules: they avoided the infrastructure of hotels and automobile fleets by using people’s private homes and vehicles. They capitalized on the emotions of travelers who wanted new experiences. And, in almost every market they entered, they broke local laws regulating lodging and transportation. Criminal behavior funded by Silicon Valley venture capitalists is called “disruption.”

Airbnb and Uber might be outliers in the extremity of their behavior, but they prove a point about the marketplace: someone is actively trying to eliminate your business model. Every sector is vulnerable to challengers, especially — and this is important — from outside the sector itself. The digital revolution did more than digitize; it neutralized the defenses that organizations had developed over hundreds of years.

The modern organization is challenged to read changes in its environment and make changes that keep it alive and prosperous. This function is more complicated and complex than it was before because the challengers are coming from outside industries. Education is being contested by non-education companies. Transportation is being disrupted by non-transportation companies. Governments? By non-governments.

I suggest a solution to dealing with the chaos… and it’s not a system. To create a more adaptable organization, you need more contributions from outside the organization. You need to engage more outsiders.

In the past, organizations could maintain advantages by keeping secrets. The old strategy of becoming valuable or irreplaceable through expertise was extinguished when Google [and the rest of the web] replaced the experts. Humans have dumped as much information as possible into the system, and we can all access it. The education system is churning out smarter 22 year-olds every year. TED talks provide short updates on the advances of any industry. The value of what you know is diminished. Advantages now come from your ability to identify changes in the environment, combine ideas, and modify your behavior. In short, your adaptability.

Outside experts provide valuable information because their viewpoint is different. [This is diversity in action.] If we can agree that change comes from outside your industry as well as within, then we can agree that out-of-field perspective is vital to planning for the future.

Michael Capellas, former CEO of Compaq, MCI, and First Data Corporation, said, “When you really solve a big problem, something breaks.” I argue that this breakage should come from within your company, not from the marketplace. Find people who can make you consider new approaches, different ideas, and innovative behavior. Invite them in to strengthen your planning and deployment. Break the rule that your experts come from inside your organization or your industry. Embracing the chaos might help.