Chaos Marketing Theory Definition Chaos is a Mathematical framework for understanding irregular and erratic fluctuations in economic cycles, financial markets, weather, other complex phenomenon, or non-linear systems with many variables. It suggests that small changes in the starting conditions produce outcomes totally out of proportion to their magnitude, making the phenomenon or system inherently unpredictable in the long term. Based largely on the work of French mathematician Jules Henri Poincaré (1854-1912).

IntroductionThe Need for a Revolution in Management Practices Growing changes in the economy and society due to the advance of technology mandate a parallel change in management practices. Companies need to embrace change. To remain excellent, your company must “cherish impermanence – and thrive on chaos.” As your company responds to change, or even restructures, do not consider only today’s known circumstances. Probe what may happen tomorrow. Be ready for the unexpected. This flexibility is necessary because so much has become unpredictable. Even the prices of energy and money change daily. Executives wonder whether to make their companies bigger or smaller, to form alliances or go it alone. Leaders aren’t sure who their partners will be from day to day.

Thus, it’s necessary to be ready to respond to changing conditions – and quickly – because forecasting just gets more difficult. The only thing you know with certainty is that you will face rapid change and tumult. “Excellent reforms of tomorrow will cherish impermanence – and thrive on chaos.” “To meet the demands of the fast-changing competitive scene, we must simply learn to love change as much as we have hated it in the past.”

When management theorists talk of “difficult times ahead” they seem to be talking of market conditions, macro and micro, which are rapidly evolving, an environment which is unpredictable, uncertain, and uncontrollable. A kind of chaos. Thus, if the world is becoming a place which is forever changing, and organizations find that they cannot plan for the long run, or predict the market forces which they will inevitably be subjected to, then they are heading for disaster.

Well, the true objective is to take the chaos as given and learn to thrive on it. The winners of tomorrow will deal proactively with chaos thus will look at the chaos per se as the source of market advantage

Chaos and uncertainty are (will be) market opportunities for the wise It is with that in mind that we must proceed." (Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, Preface)

In other words, one approach is to treat chaos as a positive force, a situation of opportunity to not only survive but to evolve and thrive as an organization. Thomas Peters came up with 5 areas of management which would, he claims, "constitute the essence of proactive performance in our chaotic world" (Peters, T. (1987), thriving on Chaos: Handbook for a Management Revolution. Vermont, p36). Within these areas Peters presents 45 prescriptions which he defines as an "urgent call for radical reform" (Peters, T. (1987) thriving on Chaos: Handbook for a Management Revolution. Vermont, p37).

Although Peters states that all his prescriptions' should be followed, he also suggests that a starting point is to "skim any of the five sections and pick the areas that appear most relevant to your current competitive situation" (Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p40). So, Peters is offering us a starting point of our choice for his revolution. He is offering us Guidance and inspiration.

The recipe for success in a chaotic environment can be broken into a number of key areas of an organisation which all need to be addressed. These include:

Marketing

Focus on differentiation and be innovative. The aim is to be disruptive and segment your market. A classic example of this has been Telstra’s marketing of its newest mobile network, “Next G”. We live in a 3G mobile world with faster mobile data and ever increasing mobile applications, but Telstra has successfully differentiated it’s 3G offering making people believe that it is even better than 3G. This is clever differentiation through marketing. You can do this in your own market by determining what differentiates you from your competitors and focusing on this.

Sales and service

Create an atmosphere of absolute obsession for customer service. Be a ’hero’ with every customer. Listen to your sales people and use them as a source of new products and services. They are in front of potential customers every day, listen to them. Service is a major component of adding value and differentiation. Arguably this is the most important of

the key areas. Survey your customers every year and don’t rationalise the results, accept them and see it as an opportunity to improve.

Innovation

Constant improvements driven by a desire to make small and noticeable improvements to the customer experience. Innovation can be in process or product. The key here is “value innovation”, that is, it adds value to the customer and reduces costs for the organisation.

People

People are the backbone of success. They will drive differentiation and innovation. Listen to them and take action. You can never train or involve them too much. Be open and share the financials with them. Give them a financial stake in the outcome of the business every year, for example profit share. Involve them in decision making and you will be surprised at the outcome. Getting the right people in the right seat on the bus is the key rather than just loading a whole lot of people on the bus. Be prepared to pay more for truly great people, it will pay dividends.

Structure

The flatter the better. This will make the business more dynamic and faster to act.

Leadership

If it’s your business or you are a manager of people, start falling in love with change (thrive on chaos), share your value and vision with the business. Be consultative and listen. One of the keys to great leadership relates to point four above; employ great people and get them in the right seat on the bus. They will help you steer the bus in the right direction. The secret to

managing people is to create the boundaries for them to operate within and let them do their job. Mistakes will be made but good people will learn from them.

Financial management and control

Every key area of the business should have its own management profit and loss and should be shared and presented by the people to the business every month. Be prepared to share the good with the bad, you will be surprised with the positive response. Also ensure that your management accounts are detailed and allows great reporting and analysis of the key drivers of your business. Too many times I see one line revenue management accounts that tell me nothing about where the business is coming from by product or service. Match the cost of goods sold with the revenue items so you can see real margin by product.

Learn to love change.

To master operating a business in a chaotic environment you must be prepared to embrace change and thrive on chaos.

In fact, it may be wise to set some parameters for what would constitute inspiration and guidance. Guidance, in the context of management theory, can be thought of as a theory or set of ideas which provide direction or advice as to a decision or course of action. Inspiration, therefore, could be where these ideas compel us to a particular emotion or action.

The presentation is supporting the notion that Chaos Marketing is very practical if the following guidelines are taken into consideration.

1. Creating Total Customer Responsiveness :

That is, those organisations which will survive are the ones which are successful in creating new markets through the development of new products or by constantly transforming current products. This is to be done with knowing the customers’ needs, preferences, tastes and wants, and can only be achieved by being continuously in harmony with the customer. Furthermore, it is essential here that the organisation and its members prescribe to this orientation towards customer responsiveness. So, it is essential then that the combination of a focus on sales and service becomes an integral part of the fabric of an organisations character.

This sounds rather much like common sense, the old adage that the customer is always right, or, that the customer always comes first. The difference here is that the approach prescribed by Peters is proactive, as opposed to reactive, to consumer demands. In fact Peters prescribes that organisations should "add at least ten value-increasing ‘differentiators' to each product or service every 90 days" (Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p50). Thus, there seems a need for organisations to be, or become, more and more dynamic, and ever evolving in their customer focus, relationships, and consumer products and services.

It does seem, however, too prescriptive to be able to achieve all this for all organisations, all of the time. There are probably real (as opposed to theoretical) factors which would prevent such policy or approach from being fully implemented. For example, the lack of expertise, lack of funding, and lack of capital resources are all factors which may act against the achievement of the overall customer responsiveness goal. An organisation may have all the will in the world, but not the means to realise that will.

The assumption is that members of the organisation will embrace this new customer responsive ethos. This may never happen and so the prescribed approach would be futile. However, for an organisation which may find itself in a position of losing touch with its customers and falling behind its rivals, Peters' proactive approach to customer focused management strategy here could provide some inspiration. It is left to the skill of the implementer of the new approach to infuse this vision in to the character of the organisation. Thus, belief in the customer responsive ethos is essential. Peters, T. (1987) Thriving on Chaos: Handbook for a Management Revolution. Vermont, p49), Peters guides the organisation on how to implement the strategy. To either overhaul its approach to its customer, or to amend its approach as appropriate.

How to Create Total Customer Responsiveness

Take several concrete measures to become more responsive to your customers. The guiding premise is that you will add value by developing “customized products or services that create new market niches.” In other words, specialize, give customers what they want and find ways

to differentiate what you offer. To achieve these objectives, follow positive basic value-adding strategies. Look for ways to:

• Provide top quality to your customer, however the customer defines it.

• Provide superior service, with an emphasis on intangibles, such as your employees’

friendliness toward your customers. Thriving on Chaos © Copyright 2006 get Abstract 3 of 5

• Become extremely responsive to what the customer wants.

• Become internationalist in your approach.

• Find ways to make your products or services unique. To succeed in applying these

strategies, deliberately acquire a series of capabilities. Begin by working on being very attentive, so you listen well to your customers. Modifying your products in line with what customers expect.

2. Pursuing fast Paced Innovation :

Constant and continuous, fast paced, innovation is required in order to adapt to the ever changing, and chaotic environment. Peters does stress, however, that tolerance of expected failure is required. It may seem that in the business world failure implies financial loss. A huge loss, however, in reality may not be acceptable, and so, failure may in fact lead to a situation where "no further experiments will be made" (Handy, C. (1992) Understanding Organizations. Penguin. p315). However, Peters does make his approach attractive. He prescribes that organisations should "invest in applications-oriented small parts" (Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p194). This guidance is practical, and smacks of low risk, and low cost experiments, qualities which may seem appealing to even a moderately risk averse management team.

Intrinsic to this policy of innovation is the need to challenge people to leave their long established comfort zones of forward planning. To make the pursuit of fast paced innovation a success, you need a team of doers, people who act now, rather than plan, and so, an organisation may feel that the ability to change peoples’ approach to work, and culture to work, a difficult obstacle to overcome. However, organisations would need to assess their own employees, and systems, and attempt to overcome issues such as habit forming behaviour which work in the opposite direction to the idea of fast paced innovation, to change. However, change can be inspiring. It can inject a rush of adrenaline in to the blood stream of an organisation. It can offer organisations facing stiff competition a new dimension, a new direction and impetus.

How to Pursue Fast-Paced Innovation

To become a fast-paced innovator, encourage internal creativity and be willing to test ideas on a smaller scale. Strip away non-essentials so you have the flexibility and the budget to set up an applications-oriented “small start” program. The four strategies for developing innovation are:

• Set up a small team to work on developing a new product or service.

• Encourage pilot projects where you start small.

• Practice “creative swiping,” that is, gather new ideas from everywhere, not only

within the organisation, but from competitors.

• To gain broad support for new ideas, involve everyone in the company in “word-of-

mouth marketing.” To encourage the implementation of these strategies, throw your support behind “committed champions” – individuals who spearhead new development efforts. “Model innovation” in the way you act. For example, advocate trying new things. Support projects that fail by treating them as ways to learn and grow for the future. However, once it is clear that new applications won’t work, shut them down quickly. Direct most of your small start programs toward smaller markets, where you can test the results. Establish a decentralized, separate business unit to spearhead your company’s innovation efforts.

Mount a quality improvement revolution. Ensure that quality is always defined in terms of customer perceptions. Treat each would-be, new or old product as an experiment to be constantly modified.

3. Achieving Flexibility by Empowering People :

In order for organisations to become more competitive, and innovative, a shift of more control in the hands of lower level management and employees is required. Through training and incentives, employees should be empowered to excel in small self- managed teams. This is meant to contribute in a greater way to the success of the whole organisation. The reform needed is radical. Possibly, it will mean doing away with bureaucratic, pyramid style, management control structures, and trusting the individual parts of an organisation to loyally serve the whole.

Inspiring as it may sound the approach is fraught with difficulties. Top level management need to devolve some of its power to lower levels, employees need to be shown how to become more flexible, decisive, proactive, and to participate, not just simply told to do it

(Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p286, figure 13)

How to Expand Participation by Empowering People

Create a more flexible company by empowering the people in it. The first guiding premise is to “involve everyone in everything,” based on the assumption that average people can accomplish more if they are involved more intensely in the organization. A second guiding premise is to use self-managing teams, because being included in small, independent groups with internal governing power helps people feel more motivated. To achieve this level of employee involvement, use these five supportive tools:

• Listen to people, celebrate their participation, and recognize and reward them for

good work.

• Spend time recruiting the right people. Seek new employees who are very skilled

and self-motivated, and who will fit well into your organization.

• Spend the necessary resources to train everyone – and keep training and retraining

people as needed.

• Implement an incentive pay program so people are more motivated to accomplish

your goals. Thriving on Chaos © Copyright 2006 get Abstract 4 of 5

• Assure employees that they will still have jobs even if their project or product fails,

so they don’t feel that they are working to put themselves out of business. Get rid of the three major inhibitors that keep employees from accomplishing what you want: structural barriers, hierarchal barriers and bureaucratic rules. Simplify and drop any structural barriers, such as extraneous levels of management. Re-conceptualize the role of your middle managers, so they become facilitators and coaches, instead of occupying hierarchal slots in a controlling command structure. Drop unnecessary or inefficient bureaucratic rules that require that tasks be done in certain ways. Such changes in rules and structure make people feel empowered. In fact, the self-managing team concept won’t work if you don’t give workers more responsibility

Two assumptions at the very core of our economic system are now causing untold hardship:

• bigger is better, and biggest is best;

• labour (human beings at work) is to be ever more narrowly specialized, or eliminated

if possible

The biggest hurdle here, conceivably, is that management may not be keen on relinquishing its control over the organisation. However, this should not be cause for non-action.

Organisations can still use financial and budgetary tools to maintain power, yet at the same time give its employee's freedom to be flexible, feel and be more empowered about many other decision making processes.

4. Learning to Love Change :

The onus here is on the leader to "oversee the dismantling of dysfunctional old truths and to prepare people and organizations to deal with - to love, to develop affection for - change per se…" (Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p388). The notion is organisations and its employees can become entrenched in rigid methods of behaviour, and activity, leading them to becoming unresponsive to the changing forces that the organisation faces. As such, they develop a comfort zone which inherently resists change and innovation. The comfort zone has its roots in human behaviour, which itself can be habit forming. The challenge, therefore, is to make loving change the new habit forming behaviour.

This is not easily done. In order to get people throughout an organisation to constantly innovate and change the way in which they behave cannot be done by simply telling people what is required of them. Thus, communicating a new ethos can be difficult. Peters gives us guidance on how to achieve this. Peters argues that leaders need to "make what exactly have you changed " .(Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p464). Leaders must lead by example.

The adherence to loving change is essential for Peters' theory to be effective in practice. That is to say, that if organisations want to become more customer responsive, to introduce fast paced innovation, and to empower its employees, then change must be welcomed and embraced, ‘loved' and not feared, by all members of the organisation .

How to Become a Leader Who Loves Change

To meet this goal, you will need to find yourself challenging “conventional wisdom,” such as traditional management views about cause and effect. Be open to experiments that test new principles throughout your company and in the market. Three tools can help you establish a fresh, better direction:

• Develop a vision of the company and its future that can inspire others.

• Become an example of this new approach. “Manage by example” through “living the

vision” in how you spend your time.

• Practice “visible management,” which means staying in touch with the front lines

and communicating with them directly about your vision. To empower people through your leadership, pay attention through careful listening, defer to the opinions of people on the front lines and delegate responsibility where you can. In addition, think of ways you can “bash bureaucracy” and promote a horizontal management

style in your company. At the same time, notice how well others respond to change and be especially supportive of those who embrace it. Finally, create a “sense of urgency” that it is crucial for everyone to support this new approach immediately.“The objective is not to be excellent, because ‘to be’ implies stasis and there is no place to stand anymore; the only excellent firms are those that are rapidly evolving.”

5. Building Systems for a World Turned Upside Down or Measure the Right Things:

It is prescribed here that systems should be designed to measure things like "quality, flexibility, innovation" (Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, p40), the "right stuff" for today's environment. Simplicity becomes the theme. Simple systems can lead to greater flexibility, less bureaucracy, and improving efficiency on all levels. By implementing systems which measure flexibility, the ability to innovate, and quality of output an organisation can benefit in a number of ways.

Firstly, an organisation can measure its customer responsiveness, its ability to innovate, and its flexibility in changing to the environments it finds itself in. The implication here is that it is measuring its ability to survive in the long run, and to thrive upon the chaos.

Secondly, the measurement of such factors will enable leaders on all levels to manage the direction of the organisation. That is, leaders will be able to set new and more appropriate goals if required more quickly, and will therefore be able to exercise control in a way that is conducive to the organisations goals.

Thirdly, measurement of such factors reinforces the ethos and practice of an organisation which attempts to be innovative, to be flexible, wants to empower its employees, and one that instils the notion that change is healthy.

However, in order to make these systems fluid and responsive the sharing of information and communication is important. If the infrastructure to allow this cannot be created then it may be that efforts are placed in vain. Having said that, we live in an age where technology is ever improving, information can be sent across the world in a matter of seconds, data on productivity and sales is available in real time, and communication methods have evolved.

How to measure the right things:

These strategies suggest setting up an effective control system in order to give your company some guiding data in an environment that is changing so rapidly it could feel like “a world turned upside down.” The concept is to “measure what’s important,” which means that you will generally measure more by measuring less. Accomplish this by simplifying your systems so you measure the “right stuff:” quality, innovation, flexibility and even effective bureaucracy-bashing. To this end,

• Revamp or change your major measuring tools.

• Decentralize the way you share information and authority, and the methods you use

for strategic planning.

• Use simplified, relevant and non-bureaucratic “bottom-up” methods.

• Set conservative, achievable financial and non-financial goals.

• Focus on having total integrity in your measurements

Conclusion

All thriving industries are inherently chaotic. It is put simply a product of the world we live in today. Everything around us is forever changing – peoples’ tastes due to growing affluence and double incomes, there is far more information and products available to us which lead to more choices, and without fail, more complexity. For a business to ‘thrive’ in this constant flux of change every business must become obsessed with being responsive to customers and without fail, constantly innovative. This means the people at the helm of any business today, large or small, must love change and be nimble to operate in a state of constant chaos. If organisations are to succeed they need to:

• Flat organisational structure• Faster and more responsive

• Quality focused

• Constant improvements by challenging the norm

• Dynamic and fun work place

• Smaller even if within a bigger organisation

• Add value through people and innovation

"If it am not broke, you just haven’t looked hard enough. Fix it anyway" Peters, T. Thriving on Chaos (1987) p3.

Bibliography:

•Sheldrake, J. (1996), Management Theory: From Taylorism to Japanization, London, Thomson

•Peters, T. (1987), Thriving on Chaos: Handbook for a Management Revolution. Vermont, Pan Books

•Handy, C. (1992) Understanding Organizations. Penguin.