Chaos Theory of Management

Chaos Theory of Management


What is Chaos Theory? Description

The   Chaos Theory method from Lorenz and Poincaré is a technique that can be used   for studying complex and dynamic systems to reveal patterns of order   (non-chaos) out of seemingly chaotic behaviours.


“Chaos   Theory is the qualitative study of unstable aperiodic behaviour in   deterministic nonlinear dynamical systems” (Kellert, 1993, p. 2).   Aperiodic behavior is observed when there is no variable, describing the   state of the system that undergoes a regular repetition of values. Unstable   aperiodic behaviour is highly complex: it never repeats and it continues to   manifest the effects of any small perturbation.

As per the current mathematical theory a chaotic system is defined as showing   “sensitivity to initial conditions”. In other words, to predict the   future state of a system with certainty, you need to know the initial   conditions with infinite accuracy, since errors increase rapidly with even   the slightest inaccuracy.

This is why the weather is so difficult to forecast. The theory also has been   applied to business cycles, and dynamics of animal populations, as well as in   fluid motion, planetary orbits, electrical currents in semi-conductors,   medical conditions (like epileptic seizures), and the modelling of arms   races.

During the 1960s Edward Lorenz, a meteorologist at MIT, worked on a   project to simulate weather patterns on a computer. He accidentally stumbled   upon the butterfly effect after deviations in calculations off by   thousandths greatly changed the simulations. The Butterfly Effect reflects   how changes on the small scale, can influence things on the large scale. It   is the classic example of chaos, where small changes may cause large changes.   A butterfly, flapping its wings in Hong Kong, may change tornado patterns in   Texas.

Chaos Theory regards organizations/businesses as complex, dynamic,   non-linear, co-creative and far-from-equilibrium systems. Their future   performance cannot be predicted by past and present events and actions. In a   state of chaos, organizations behave in ways which are simultaneously both   unpredictable (chaotic) and patterned (orderly).
Origin of Chaos Theory. History

Ilya Prigogine,   Nobel laureate, showed that complex structures could result from simpler   ones. This is like order coming from chaos. Henry Adams previously described   this with his quote “Chaos often breeds life, when order breeds habit”.   Henri Poincaré was really the “Father of Chaos [Theory],”   however. The planet Neptune was discovered in 1846 and had been predicted   from the observation of deviations in Uranus’ orbit. King Oscar II of Norway   was willing to give a prize to anyone who could prove or disprove that the   solar system was stable. Poincaré offered his solution, but when a friend   found an error in his calculations, the prize was taken away until he could   come up with a new solution that worked. He found that there was no solution.   Not even the laws of Sir Isaac Newton provided a solution to this huge   problem. Poincaré had been trying to find order in a system where there was   none to be found. Chaos theory was formulated during the 1960s. Significant   and more practical work was done by Edward Lorenz in the 1960s. The   name chaos was coined by Jim Yorke, an applied mathematician at the   University of Maryland (Ruelle, 1991).



Usage of Chaos Theory. Applications

The   principles of Chaos Theory have been successfully used to describe and   explain diverse natural and artificial phenomena. Such as:

  •   Predicting   epileptic seizures.
  •   Predicting   financial markets.
  •   Modelling   of manufacturing systems.
  •   Making   weather forecasts.
  •   Creating   Fractals. Computer-generated images applying Chaos Theory principles. (See   figures on this page.)

In a   scenario where businesses operate in a turbulent, complex and   unpredictable environment, the tenets of Chaos Theory can be extremely   valuable. Application areas can include:

Steps in Chaos Theory. Process

To   control chaos, the system or process of chaos has to be controlled. To   control a system, what is needed is:

  1.   A   target, objective or goal which the system should reach. For a system with   predictable behaviour (deterministic) this may be a particular state of the   system.
  2.   A   system capable of reaching the target or goal.
  3.   Some   means of influencing the system behaviour. These are the control inputs   (decisions, decision rules, or initial states).

Strengths of Chaos Theory. Benefits

Chaos   theory has wide applicability in modern science and technology era.   Communication and management may see a paradigm shift, as will several other   business areas. Research and study in this area by academics can be extremely   useful for the business and financial world.


Limitations of Chaos Theory.   Disadvantages

The   limitations of applying Chaos Theory are in due mostly from choosing the   input parameters. The methods chosen to compute these parameters depend on   the dynamics underlying the data and on the kind of analysis intended, which   is in most cases highly complex and not always accurate.

Chaos   theory is not as simplistic to find an immediate and direct application in   the business environment, but mapping of the business environment using the   knowledge of chaos definitely is worthwhile studying.


Assumptions of Chaos Theory. Conditions

  •   Small actions   produce rather large consequences, creating a chaotic atmosphere.


Book: James   Geick – Chaos-Making a new Science –        

Book: Ali   Bulent Cambel – Applied Chaos Theory : A Paradigm for Complexity –        

Book: Richard   Tiplady – World of Difference –        

Book: Garnett   P. Williams – Chaos Theory Tamed –        

Posted in Good Read, Knowledge & Beyond, Perspectives to Ponder Upon, Problematising Process, Processing Problem Soving, Wisdom Generator.