Chaos Theory and Management: Learning from Systems in Nature

by Jason Evanish, CEO Get Lighthouse, Inc.

Does your team have enough freedom to make independent decisions and learn from failure? Are rigid rules at your company limiting your people's creativity?

Creativity and experimentation are crucial for innovating and developing problem-solving skills. People have to feel safe to try, and sometimes fail

Yet, very few companies treat them like a job expectation or develop strategies for nurturing them.

Is your team creative?

According to a 2017 survey from Gallup, only 29% of employees feel like they're expected to be creative or think of new ways to do things at work.

The same survey found that a mere 18% of employees think they can take risks at work that could lead to important new products, services or solutions. This can cause organizations to fall behind and people's careers to stagnate unnecessarily.

Unsurprisingly, companies prefer stability over learning from mistakes. In most cases, employees are expected to stick to the plan rather than improvise. 

Unfortunately, creating an environment in which people are allowed to experiment and be creative isn't easy.

So, what can we do to provide our teams with enough creative freedom to grow?

Using Chaos Theory to help your team innovate more

One of the answers could lie in learning from nature. Chaos Theory, a scientific principle explored during the mid-to-late 1980s, offers valuable lessons on how all complex systems evolve after failing. Chaos Theory and management have a lot more in common than we could have imagined.

As weird as it sounds, it turns out that weather patterns, ecosystems, anatomical functions, and organizations all show eerily similar characteristics. They are all affected by chaos, a force defined as the state of inherent unpredictability and disorganization

In nature, chaos is not just a disruptive element, it helps systems restructure themselves in new ways. It offers lessons on creativity, failure, and the complex relationships within organizations.

Today's post takes a look at three Chaos Theory principles successful leaders have applied to their teams to drive creativity and learn from failure - and how you can do the same. 

Table of Contents:

  1. There is no failure in nature - only reorganization
  2. The Butterfly Effect
  3. Having too much stability is rarely a good thing

1) There is no failure in nature - only reorganization

Even though we're unaware of it, our thinking about management is still influenced by ideas from the Industrial Revolution. We still use machine imagery to describe productivity and people far too often. 

Think, for a second, about empty phrases such as "reducing costs, optimizing productivity, and increasing efficiency.” This jargon comes from a time where workers were seen as instruments rather than individuals, and evaluated based on output only. 

Back then, failure was considered the absolute worst case scenario. If an instrument or a part of the system failed, it was no longer seen as useful and needed to be replaced. 

However, Chaos Theory teaches us this isn't how things happen in nature. 

Natural living systems (including organizations) are much more complex than mechanical ones. Your company and the people in it are integrated parts of a dynamic, interconnected entity prone to ambiguities and chaos

In such systems, failure isn't the final outcome, but a way for elements to reorganize and adapt to new conditions. In fact, for nature, there is no failure in the traditional sense of the word. There is only change.

Chaos is nature's force for change

Belgian physicist and Nobel laureate Ilya Prigogine proved that chaos is the driving force behind the evolution of natural systems. When it causes a system to break down, it also triggers it to change. Its elements become free to form new structures and self-organize.

Some examples include:

  • The human brain's ability to form new neural networks, retain function, and compensate for damaged parts after sustaining permanent injuries
  • Schools of fish reorganizing to become much closer to each other and form larger groups to confuse predators
  • Black markets forming as a consequence of unstable economies, high market prices, etc.

When challenged, systems in nature have remarkable ways of restructuring themselves. As a manager, you can use this to your advantage by giving your team enough breathing room to learn from failure

Instead of being overly controlling to prevent your people from making mistakes, provide guidance, but allow people to make their own decisions as much as possible. You will be surprised by their way of thinking and the solutions they are able to find. More on how to apply this idea in the next section.

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Accepting chaos and using failure to grow

Chaos is a force of transformation in nature - it causes systems to "fail”, learn and reorganize. Jeff Bezos knows this, which is why he wrote about the importance of failure in one of his Amazon shareholder letters:

"One area where I think we are especially distinctive is failure. I believe we are the best place in the world to fail (we have plenty of practice!), and failure and invention are inseparable twins.

To invent you have to experiment, and if you know in advance that it's going to work, it's not an experiment.”

According to EY, 79% of C-suite executives say their organizations are tolerant of failure – something they consider a key element of the innovation process.

However, it's one thing to say you're ready to fail from time to time and another to let failure destroy your company. How can you make sure there's enough room for mistakes in your organization without putting everything at risk?

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Manage risk and failure with the waterline

The company W.L. Gore offers a great analogy for solving this. It's called "the waterline principle”: 

"The waterline principle means that it's ok to make a decision that might punch a hole in the boat as long as the hole is above the waterline so that it won't potentially sink the ship.

But, if the decision might create a hole below the waterline which might cause the ship to sink, then associates are encouraged to consult with their team so that a collaborative decision can be made.”

In other words, W.L Gore suggests giving your team enough freedom and independence to learn from mistakes, but ensuring those mistakes don't have irreversible consequences.

If it's a mission-critical task, or high risk, be more prescriptive and step in. Meanwhile, if it is a low-risk project or task, give your people more leeway to experiment, learn, and make mistakes. 

This throws more chaos into the mix, as you're giving up a bit of control as a manager, but it creates valuable experience for your team members as a result.

By allowing team members to fail, adjust and reorganize on their own, you'll start to see more inventiveness and fresh perspectives in their work. 

2) The Butterfly Effect

One of the most important findings of Chaos Theory is that even the smallest changes to systems can have huge effects on their future state. This is what's known as the Butterfly Effect

When American mathematician Edward Lorenz titled his essay: "Does the flap of a butterfly's wings in Brazil set off a tornado in Texas?”, it certainly sounded like an exaggeration.

However, Lorenz was able to prove why complex systems in nature are so difficult to predict. He used meteorology as his testing grounds and showed that indicators such as air pressure, wind direction, humidity, and others weren't enough for an accurate long-term forecast on their own.

He explained that the relationships between these factors are so complex, any long-term prediction becomes futile. The consequences of constantly changing relationships in any system can snowball, leading to unimaginable results. 

One notable example in history includes a war between 14th century city-states Bologna and Modena in what is today Italy. A band of Modena soldiers raided Bologna and stole a large wooden bucket from it. 

Bologna, feeling the sting of embarrassment, immediately sent a small unit of their own soldiers to retrieve it. However, the conflict quickly escalated into a war that went on to last for...12 years

Similar phenomena happen in economics - you can never tell when a stock market crash will happen with 100% accuracy. This is because these are complex systems, not fixed bodies. 

The relationships between their elements never stay exactly the same. Chaos looms in all of them, ready to set off a chain of unpredictable reactions.

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Learning from The Butterfly Effect - every action matters

The Butterfly Effect is discouraging because it teaches us that accurate predictions in complex systems are impossible. On the other hand, it also teaches us that every action we take is important.

In organizations, individual patterns of behavior and the reactions of people can be unpredictable, but nonetheless linked to one another. The feedback from each of those actions becomes reflected on others in the system. This causes a new wave of decisions and reactions, and the cycle continues.

Instead of focusing on predicting your company's performance with complete accuracy, you are better off impacting relationships within it. There are now more studies proving the benefits of teamwork, networks, and culture than ever before. 

As Meg Wheatley, the author of Leadership and the New Science puts its:

"The impact of vision, values, and culture occupies a great deal of organizational attention. We see their effects on organizational vitality, even if we can't define why they are such potent forces. 

We now sense that some of the best ways to create continuity...happen through forces that are invisible yet palpable.” 

Whether ‘good' or ‘bad', smaller changes in systems can scale and spiral into much larger consequences than we ever intended. 

That's why as a leader, every seemingly insignificant or immeasurable action matters. 

To make improvements on every level of your organization, focus on relationships by doing the following: 

In time, you'll intuitively start to understand why these foundational leadership methods should be a priority for everyone. 

Mary Kay Ash, the founder of the Mary Kay Cosmetics empire, knew this well. She once said: 

"Our marketing plan is not based on any great management revelation, but on the simple policy of making our people and our customers feel important through every communication that goes out.

To recap, here's what the Butterfly Effect teaches us about management:

  • The relationships between parts of a system can be more important than the individual parts themselves.
  • Even the smallest actions can have a huge impact on organizations, especially at critical tipping points. This is why planning too far ahead is next to impossible and why you should focus on the things you can control.
  • Despite having no way of measuring them, intangible factors such as relationships, rapport, mutual understanding, and morale are highly important for understanding how organizations work.
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3) Having too much stability is rarely a good thing

Balance. Order. Stability. In the world of leadership, these qualities are considered desirable. And they are - up to a certain point. Stable organizations are defined by structure, rules, and goal alignment. 

Their aim is to function in a controlled, predictable manner. In such systems, everyone has a predefined role to perform, a quota to reach, or OKRs to measure success against. People are encouraged to focus on their own goals, rather than pay attention to the bigger picture or what's going on in other teams and departments.

However, forcing rigid rules on your team comes at a price. Without enough flexibility, you're limiting people's opportunities to express themselves freely, innovate, and be creative. 

In systems in nature, too much equilibrium and repetition leads to a lack of ability to change, self-organize, and adapt to new conditions. Researcher Ilya Prigogine described this effect in molecules.

Prigogine suggested that without chaos and change, molecules lose their ability to combine in new ways. Unfamiliar factors in their environment that challenge their status quo are the very thing that allows them to form new structures. Without them, they have nothing to react or adapt to, and thus begin to stagnate. 

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Chaos - a way for leaders to encourage creativity

So, what does non-equilibrium mean for leaders?

It means finding ways to stimulate your team's creativity. It means being willing to forget rules and conventions for the sake of fresh ideas. It means introducing a bit of chaos to your day-to-day activities to see how your team reacts to new situations.

There are many famous examples of leaders who understood that chaos is part of what makes us creative:

  • Steve Jobs had the corridors at Apple and Pixar designed to make people from different departments bump into each other all the time. This creates spontaneity, encourages people to exchange ideas and opinions, and helps them understand perspectives different than their own.  
  • When shooting the Oscar-nominated movie "Goodfellas”, Martin Scorsese would deliberately write ambiguous and short acting directions to get the cast to improvise. For example, the script would instruct Joe Pesci or Robert De Niro to "tell a joke” or "an anecdote”. Scorsese was essentially trying to create controlled chaos. He knew how good the chemistry between his actors was, so all he had to do was let them express it freely.
  • At Ritz Carlton, employees are given a $2000 budget to spend on making customers happy - no questions asked. They are encouraged to think freely and make the decisions they think are best. It's a system that's flexible enough to allow independent thinking. When it was introduced in the 1980s, the budget was enough to book a hotel room for 10 days. Today, it's spent on personalized gifts and experiences. One time, Ritz Carlton went as far as to send a lost stuffed giraffe to a girl who had been a guest of the hotel halfway across the globe - but not before everyone took photos with it to prove it wasn't too lonely without her. 
  • Site Reliability Engineers for some of the world's largest companies follow a technique called "Chaos Engineering”, which intentionally breaks their complex systems. By simulating potential problems like a server going down, slowed connection speeds, or overloaded systems, companies are able to improve the reliability of their sites.  
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The best managers are able to use rules as enablers rather than restrictions. Unfortunately, there is no single answer to how to use chaos as a leader. It requires a lot of out-of-the-box thinking and adapting to a particular situation. 

However, you can do the following things to make sure your existing company structure is not limiting your team:

  • Encourage people from different departments to communicate with each other; if you can't afford to renovate your office like Steve Jobs, organize occasional peer 1 on 1s and team-building events
  • Challenge team members to see things from someone else's perspective ("If you were in my place, how would you solve this?”)
  • Keep re-evaluating how rules at your company are affecting your team ("Are you encouraging independent thinking?”, "Are you stimulating creativity or stifling it?”, "Are there enough opportunities for people to suggest new ideas?”)

Embracing chaos doesn't mean giving up on rules completely. Use structure and creativity as your tools and keep reshuffling them until you find the perfect balance. Soon enough, you'll start to notice your team members developing a new outlook on work and expressing themselves in original ways.  

Chaos Theory and Management - it's about balance

While too much chaos can shake an organization to the ground, carefully introducing it to your leadership methods can open up interesting new perspectives. 

Knowing how and when to do so is difficult and depends on the context, but the bottom line can be boiled down into three important concepts:

  1. Accepting unpredictability and failure and learning from them
  2. Relationships in systems are important - every action someone takes has the potential to cause big changes
  3. Rigid rules in a system will stifle creativity and new ideas

With these in mind, you can start experimenting to see what works for your team.

However, remember - chaos is nothing without order. Your organization needs to be stable enough to align everyone's goals, but flexible enough to adapt and evolve in the face of challenges.

We also recommend reading these resources on relationships, culture, rapport, and other skills that will make you a better manager who embraces the balance between chaos and order:

What is chaos theory in simple terms?

Chaos theory is a scientific principle that describes systems in nature that are very complex and sensitive. A very small change may make the system behave completely differently.

What is the chaos theory used for?

Chaos theory is used to describe the characteristics of systems in nature, but it can be applied to management and organizations as well.

What is chaos theory in management?

Chaos theory in management is the idea that organizations behave in ways similar to complex systems in nature. It can be applied to boost your team's creativity and encourage learning from mistakes.

What is chaotic leadership?

Chaotic leadership is a leadership style that encourages introducing elements of chaos to your team's work. This includes fostering spontaneous cross-team communication, giving employees enough freedom to fail from mistakes, and other principles.

Jason Evanish

Jason Evanish

As the founder and CEO of Get Lighthouse, Inc, Jason and the Lighthouse team have helped managers grow their leadership skills in dozens of countries around the world. They’ve worked with a variety of companies from non-profits to high growth startups, and government organizations to well known, publicly traded companies. Jason has also been featured in publications including NPR, the Wall Street Journal, and Fast Company.

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