What Leaders Can Learn from Chaos Theory

Chaos Theory has a lot to say to help us make sense of our lives and to help leaders be more effective too.

Chaos theory tells us that in complex systems, even the smallest change can set events on a completely different course. What seems trivial or isn't currently known may affect everything. That makes prediction nearly impossible.

We can make sense of things backwards, but not forwards.

An example.

There I was sitting in the pub last week with my close friend, Matt, talking about everything and nothing. I've known Matt for 30 years.

Thirty years ago, I decided I wanted to play rugby, and, it being in the days before you did everything like this online, I phoned three local clubs. The first two didn't answer. The third picked up, and the voice on the other end of the line said, "Training, 7:30 tomorrow evening."

I turned up, and that night I met Matt and many others who became lifelong friends. Rugby is like that.

A few months later, I got talking to a girl playing netball at the same club. We eventually got married and had two children. One now lives in Tennessee, and I fell in love with the Smoky Mountains when I visited him there.

My wife had friends in the city where we now live. The ripples go on and on.

So much of my life is a direct consequence of that single phone call; one rugby club answering the phone, and two others not. I could never have predicted any of this. But it's perfectly clear, looking backwards.

We've all got stories like that.

Leaders face the same reality, but we think we have control. In fact, actions and decisions ripple unpredictably through teams, customers, and partners, and what seems like a minor choice in the moment can trigger consequences that spread across the whole system.

Chaos Theory and its relevance to leadership

Organisations are Complex Systems. Teams, markets, and stakeholders are interconnected in ways that make outcomes hard to predict.

We live in a world where:

Twists and Turns and Non-linearity are everywhere. Cause and effect aren't proportional. A small action might lead to a significant result, but an organisational effort might achieve very little. Think of a leader whose casual remark in a meeting sparks a major cultural crisis, or when a big "Change Initiative" falls flat.

Starting points matter more. Tiny differences at the start can grow into big differences later. For leaders, the tone you set in the first weeks of a project, or the way you handle an early setback, can shape everything that follows.

Unexpected Patterns Emerge. Even in the middle of disorder, patterns can appear. New ways of working seem messy and unpredictable in the moment, but over time, systems inevitably take root and opportunities emerge. The best leaders learn to encourage the discovery of patterns rather than trying to control everything.

When the pandemic hit, we didn't know what the Impact would be. We had no idea that it would lead to, for many people, an upsurge in productivity, new ways of remote working, and even the dreaded "team fun" Zoom calls.

Unpredictability. You can't perfectly forecast; you can only adapt. Leaders who try to predict and control will get stuck. It's better to stay flexible, experiment, and adapt as events play out.

The list of companies that didn't change is long: Kodak, Blockbuster, Blackberry, Friends Reunited- and the list continues to grow. The thing is, although the reasons for their failure to adapt are obvious after the fact, adaptability doesn't become easier or more intuitive in the moment.

So if we can't control change that will impact us, I believe we have to instead accept it, and encourage it. 

Increasing complexity?

(Spoiler - Take any marketing message that starts "in today's complex world" with a healthy dose of scepticism. But having said that...)

It's difficult to say whether the world is more complex today; it feels that way, but we don't really know. But it's undeniable that our systems and the way we work are more interconnected than ever. And that makes us more fragile and prone to the downsides of complexity.

We're more specialised, we rely more on the expertise of others. Wherever possible, we've sacrificed redundancy for efficiency. And that comes with a cost.

Teams, supply chains, workers, strategies, and companies are more fragile than they've ever been, and we operate in environments where events that might have been absorbable years ago are now shocks to the entire system.

This is the world leaders inhabit, and since it's unlikely to change anytime soon, it's worth asking,

"Are leaders helpless in the face of whatever happens?" The answer, I believe, is "no. Absolutely not.".

And to the question, "Should leaders even try to anticipate what will impact them, their teams, and organisations?" I believe the answer is a resounding "Yes!"

But how? If we can't predict what will happen and things that look important now may not actually be (and vice versa), what should we actually do?

Lessons for Leaders from Chaos Theory

There are a few underlying principles of Chaos Theory that leaders would do well to adopt to help them, their teams, and the company thrive:

Embrace uncertainty. 

Understand that the future can never be accurately predicted. Plans are helpful, but they should never be rigid.

As Dwight Eisenowever is attributed to have said, "Plans are worthless, but planning is everything".

Focus on increasing adaptability, resilience, and the ability to adjust as conditions shift.

When the pandemic hit, Airbnb scrapped its long-term plans overnight and shifted resources into short-term, local stays. That flexibility allowed it to recover faster than most travel companies.

Say "maybe" more and don't pretend the future is fully knowable.

Embrace ambiguity and adaptability over rigid planning. Yes, your team wants you to remove as much ambiguity as possible, but don't be afraid to tell them, "This is what we know and this is what we don't."

Make small, intentional changes and go from there. 

Large planned programmes can be risky in complex systems, and small, well-designed experiments are safer and often more effective. Pilot the idea, learn from the results. Scale what works, drop what doesn't. Don't let your ego hold onto an idea because you've invested in it.

Maintain enough structure to function, but enough freedom to adapt.

How you say "no" to an idea is the difference between the team coming up with ideas again or keeping them under wraps. Never stamp on your team's creativity.

As Marshall Goldsmith said, "If a team member comes to you with an idea, and you say 'it would be better like this, ' you'll improve the idea by 10% and remove 90% of the motivation.

Know your feedback loops. 

Early signals matter. Leaders who build strong listening channels across teams, customers and partners can spot change before it becomes disruptive. Nuture them.

Toyota's "andon cord" system, where any worker can stop the production line if they spot a problem, is a famous example of a feedback loop that prevents small issues from becoming catastrophic.

Look for emerging patterns.

In apparent disorder, new patterns and opportunities appear. The leader's role is to notice them early, amplify the ones that work and adapt the organisation to take advantage.

Big I and little i innovation.

This doesn't have to be the big I innovation of Netflix or Apple iPod or paradigm shifting technologies like AI, but the probable Impact of:

New regulations

The increase in the price of container shipping

The USB-C directive in Europe

The price of wheat due to the war in Ukraine

 The key is to put in place systems to spot disruption before competitors do.

We recently worked with a company to streamline marketing-supported BD requests into a Smartseat-enabled ranking system, which cut costs and ensured everyone felt supported. Little i, big Impact.

Leading  at the Edge of Chaos

So in summary, responding to chaos requires a lot of innovation or, instead, thinking about innovation as more of a verb than a noun.

Change and innovation happen through small, repeated actions that compound over time. Pay attention to the little things—the way a decision is explained, the tone set in a meeting, the space allowed for experimentation. These create the optimal conditions for innovating.

The most significant breakthroughs often appear in the space between too much order and too much disorder. Leaders need to simultaneously think about "small-"innovation (everyday improvements) and "big-I" Innovation (transformational shifts).

You may not always know how a change will ripple through the system, but that doesn't mean you should bury your head in the sand. Utilise tools and processes to anticipate what is coming down the pipeline and assess the potential Impact.

Remember, small changes can have significant effects. Neglecting a minor issue can result in a major crisis. Everything you do matters.

Focus less on fixed plans and more on anchoring teams around clear principles. People look for steady hands when conditions are unpredictable.

Remember, you don't operate in isolation. Your organisation is part of an ecosystem that includes other departments, suppliers, partners, and customers. In chaotic systems, those relationships amplify risk or create resilience. Actively bring them into your thinking.

Leadership in a world shaped by chaos and complexity is not about control. It is about awareness, adaptability and creating conditions where people and ideas can thrive.

If  you want to understand more about how chaos theory impacts our lives, I’d recommend Brian Klaas’s excellent book “Fluke: Chance, Chaos, and Why Everything We Do Matters”. Fluke sparked many of the ideas in this article.