From Chaos to Creativity

From Chaos, creativity; from creativity, order; from order, chaos; from chaos, creativity....

This rule of nature know as Chaos (or Complexity) Theory provides a powerful tool to increase bottom-line productivity. It's use, however, requires a retooling of bottom-line thinking that asks us to:
(1) Discard traditional top-down management styles in favor of bottom-up management.
(2) Develop relationships (social capital) among employees and clients to ensure a creative, innovative, and productive environment (intellectual capital).
(3) Develop a strong vision for our businesses that fully utilizes bottom-up management and social and intellectual capital to build productivity (financial capital).

Today's business environment has become an increasingly complex culture whose hallmark is chaotic turbulence. Within this environment businesses find themselves functioning in one of three different zones: the Stable Zone, the Chaotic Zone, or the Creative Zone. Out of fear of the chaotic we most often opt for the Stable Zone, but in so doing we opt out of the Creative Zone.

For us, most often, stability is equated with order, and in our thinking, if we have stability and order we can then function in the Creative Zone. In fact, however, the Stable Zone is the worse place in which to function. Stability is not order, but inertia. Ironically, because bottom-line analysts and executives see the Stable Zone as "uniform motion" which appears as a straight, but consistently rising bottom-line, traditional organizational system management and stake-holders applaud the company that functions within the Stable Zone. A perfect example of this in how the economic stimulus money has been allocated; almost always to traditional management systems, to move them from the Chaotic Zone and get them back on an even keel,i.e., Stable Zone, while non-traditional entrepreneurial management systems that thrive in the Chaotic Zone have received little funding.

What is not being seen is that the company residing in the Stable Zone is stagnating, and sound innovation* is dying before it can be birthed. The Stable Zone company fails to respond to opportunities and to adapt to change, leading to an unresponsive system and the failure of the supposed consistency, or order. Unresponsive systems always by default enter into the Chaotic Zone. Here they bounce off the wall, overreact, and haphazardly seek solutions for undefined problems. Companies in the Chaotic Zine are led by events rather than choices.

This, at any rate, is how businesses have traditionally structured the business environment and have behaved in the Chaotic Zone.

Nature functions differently.

In nature chaos is used as the tool of creativity. or better stated, creativity is found within the chaotic. Obviously then, from the perspective of nature, to function in the Creative Zone requires us to rethink chaos and turbulence.

Chaos Theory defines "chaos" as "the apparently random and unpredictable behavior of a deterministic system that is extremely sensitive to infinitesimal changes in initial parameters (Oxford Dictionary)." Chaos Theory describes our current business environment to a tee, does it not? Simply put, to bring order out of chaos, the process must begin with finding the order in what appears to us as utter confusion. Contrary to Chaos Theory, traditional thinking holds, as we see in the mission of the federal stimulus package, that we must remove chaos before we can achieve order. Yet, according to Chaos Theory, the creativity that gives rise to innovation, and thus order, begins in chaos (think of the various Creation stories, such as Genesis). The Creativity Zone is that zone that allows the seemingly chaotic paradoxes that lead to creativity and innovation to flourish. When we function in this zone we do not live within the chaos, but rather we allow creativity to emerge by tolerating, embracing, enhancing, and understanding the ambiguities of chaos.

"All this is good and well," you are probably thinking, "but how do it work on a practical level?" Perhaps the easiest way to see this is to look at why it does not work in most of our businesses. Chaos Theory explains how individual and corporate social interactions – relationships – contribute to emergent and innovative systems. In the traditional business environment, structural order and consistency falls by the wayside because the underpinning of the organizational system is not built upon relationships Traditional business structural methodology is top-down, bottom-line profitability. In "closed systems" the focus is on management control rather than intrinsic, or relational, motivation. Thus, closed systems are always more comfortable in the Stable Zone, where management has full control.

The chaos-to-creativity-to-order, or "open system" approach confronts the traditional mechanistic linearity of business with an organic, nonlinear, and holistic methodology that states: "Order cannot be achieved in a closed system." Conversely, "Creativity and innovation that produce order and consistency in organizational structure and increase bottom-line productivity must emerge naturally (open system) in the organizational structure."

With this approach, based on the premise that when autonomous agents (here people) interact and naturally affect one another, patterns emerge, unfolding an intrinsic order within what appears as utter confusion. This intrinsic order then becomes the bottom-line, resulting in a culture of care and connection in which people are more willing to adapt to change because they feel that they are an intrinsic part of the change. Willing adaptation produces creativity and innovation. Note that this is not the traditional bottom-line of innovation or profitability, nor does it make the traditional assumption that innovation and profitability motivate people to become more creative and productive. Furthermore, it challenges traditional problem solving and ideation techniques with the notion that it is more effective to allow solutions to naturally emerge from people close to the problem than to impose close system problem-solving/solution methodology from above.

Turbulent or chaotic environments create forces that are misunderstood by traditional closed system approaches and thus thwart creativity. It is this misunderstanding that gives rise to traditional management's fear of change, even while giving lip service to it. It is our correct understanding of these forces that allows us to find the intrinsic order underlying the chaos. To quote Sherlock Holmes, "When we eliminate the impossible, we are left with the improbable, which must be the truth." It is the "improbable" in open systems that generates innovation and order. Unfortunately, top-down management cannot by its very nature see the truth, or order, in the improbable; the improbable is undistinguishable from the turbulence. What top-down management, with its fear of chaos, fails to recognize is that eliminating the "impossible" is not the same as eliminating chaos.

A turbulent environment drives business to increase their "organic" characteristics. "Organic" is to be understood as the inherent structure of an organization. In every organization, two organic, often competing, inherent structures exist: the formal corporate structure and the informal social structure. Turbulent environments can drive one or the other, but not both. A turbulent environment will either drive a business to become more entrenched in their formal corporate structure, or to increase their social structure in a way that brings order from the turbulence. Obviously, the former is the dysfunctional, but nevertheless, the one we see happening the most often (think of corporate insistence on paying multimillion dollar bonuses even in the face of failure). Although giving lip service to building social structure, companies. i.e, the entrenched powers, fear change, which they see as contributing to chaos, and seek to hold change at bay. And let us not forget, that for the entrenched chaos is perceived as a threat to the status quo.

Therefore, turbulence can, and often does, create even more chaos. Properly understood, however, turbulent environment drives businesses to empower, at all levels, increased lateral communications and core competencies. In a turbulent business environment, the survival of the fittest is no longer determined by a strong financial bottom-line. In a turbulent business environment, survival is determined by a strong culture of care and connection that gives birth to creative ideation.

As turbulence increases companies react by reducing differentiation and integration in favor of increased specialization (quite often resulting in layoffs). Historically, acquisition and diversification contribute to a turbulent business environment. However, reduced differentiation and integration has the potential to be positive (creative) or negative (chaotic). How reduction takes place determines the outcome. Traditional methodology is to spin-off new derivative companies to reduce differentiation in the parent company. Such a move assumes that there was too much derivation from core competencies within the parent company to sustain growth. And indeed too much diversification, while in the immediate picture bolsters profitability, in the long run had the potential to contribute to a turbulent environment, as has been obvious these past few years. Nevertheless, it must be remembered that differentiation and integration is not the root cause of chaos; bad management is. Which leads us to ask, if management were bottom-up, would the company be able to use diversification to sustain growth? This is the wrong question! The question is, if management were bottom up would the company need diversification to sustain growth in the first place? Studies indicate that companies built upon open system management tend toward focusing on core competencies to sustain growth, and succeed at a higher level than do closed system organizations. Perhaps then, our original question should be rephrased to ask, "Can a closed system organization fully utilize core competencies?" The utilization of core competencies, according to Chaos Theory, must be made on the micro-level, not the macro-level where closed systems traditionally focus their energy. In other words, traditional business methodology is too busy seeking to eradicate the chaos to see the intrinsic order, and thus creative innovation, with it. It is only when we focus in on the elements of the turbulence that we can find and utilize chaos for creativity and, thus, order.

*I use the term "sound innovation" here because much of our economic meltdown was caused by that which, while called "innovative," was built upon speculative premises, not true creative innovation.

© Frank A. Mills, 2004, 2010. Originally written 2004, revised 2010