Organisations, Innovation and Complexity: New Perspectives on the Knowledge Economy

University of Manchester
9-10th September 2004

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Models and the Evolution of Strategy

Michael Lyons

BT,
Ipswich, UK

Abstract

This paper discusses the role of models, both qualititive and quantititative, in developing novel strategies and, more generally, in the process of innovation. The paper adopts an evolutionary approach and considers how models support the processes of variety generation, selection and propagation within an organisation.

Variety generation is a key stage of the evolutionary process. As knowledge artefacts derived from different disciplines or schools of thought, models provide a structure and language by which ideas can be communicated, debated and synthesised into new ideas. However, of equal importance is their use in the selection and propogation of ideas.

At some point ideas, concepts or plans have to be selected for implementation. Markets are an effective selection mechanism for new products and service ideas – both by determining which products are successful and by controlling the allocation of resources for development and production. However, the selection process for alternative ideas in the strategy or policy making domains are less obvious. Institutions store and communicate information and embody ‘rules/ standards of socially agreed belief’ which prescribe standards or norms to distinguish reliable from unreliable knowledge. But how do these norms (often unspoken) develop and how can they be challenged? Models provide one means of testing and challenging the norms.

Models, particularly quantitative models, have a powerful role in selecting between alternative strategies. Although, in any system of complexity, a model cannot identify a single optimal strategy, models can suggest which strategies are more likely to lead to a desired outcome. At the very least they can show that some strategies will never produce the desired result under feasible circumstances. This approach can be remarkably useful as it allows some strategies to be rejected with confidence, and provide a powerful means of challenging received wisdom.

Models also have a role in the propagation of ideas. They are one way in which new ideas emerging from individuals can be translated into a change of understanding within an organisation. A modelling project will normally start with interviews of individuals to obtain their understanding of the issue. The modellers will then produce a model, based on these interviews, which is an amalgamation of the multiple views, mediated by the understanding and knowledge of the modellers. The resultant model, which itself can be criticised and modified, is a means by which a common presentation and understanding of issues may be developed amongst different individuals.

Models thus have a role at all stages of the evolutionary process. However, it is important to recognise their limitations - a model not only provides a language by which ideas may be discussed and manipulated, but can also put boundaries on the ideas considered. This is one reason why it is important to develop multiple models of a complex issue.

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