This is for situations with a clear and highly stable relationship between cause and effect. The approach follows the logic: sense – categorize – respond. Proven solutions can be applied (Best Practice). Clear process descriptions and checklists are effective tools in this context. A typical example of a Domain 1 situation would be the financial reporting process.

Beware! The obviousness and simplicity of the process might prevent you from being open to new approaches and mindsets. Frequently ask yourself “What would we do differently if we could start all over?” This will make your processes even much more efficient and effective.

Domain 2 refers to situations with a relatively stable cause-effect relationship that might be difficult to identify at first glance. Ananalysis or some sort of examination along with a considerable amount of expertise may be required to determine the relationship between cause and effect. A sense – analyze – respond process is called for.

Since there may be various ways to solve the issue, a Good Practice approach is taken. Preparing a financial statement or repairing a machine are examples of this domain. Both require expertise and an analytical approach.

There are several pitfalls in this domain: You may suffer from Analysis Paralysis, unnecessarily anticipating and overplanning a situation. Endless expert discussions may simply produce over-complicated solutions.

Managing these two domains with operative excellence has been considered the key to business success for many years. The biggest danger here is to rest on one’s laurels. The assumption that past successes can be transferred directly into the future may prove to be fallacious, particularly if your environment is shifting toward increased complexity..

Complex situations make it impossible to predict cause and effect. The relationship can only be deduced in retrospect. The advice is to probe – sense – respond. This requires hypotheses, (well- performed) experiments and iteration as well as an approach based on Emergent Practice. Agile methods come into play here. They allow solving issues step by step while quickly responding to rapid changes. Examples for this domain are the development of new products and services.

Leaders that have learned in business school that every management situation can be planned and predicted often find it difficult to trust in emergent approaches or to recognize and accept complexity at all. There is a strong reflex to fall back to a command- and-control mode, seeking waterproof plans with fixed results. It is impossible to manage complexity in such a way. In fact, this may even cause it to transform to some sort of chaos.

Rather, we need leadership that creates the framework for Emergent Practice and helps to identify patterns. Creative solutions as well as new business models can be successfully developed with this approach.

If no relationship between cause and effect can be identified on a systemic level, we speak of a chaotic situation. Searching for patterns or appropriate solutions is obsolete in this context. With such a high level of instability, you are required to act – sense – respond. This is called Novel Practice . Examples for such chaotic situations are crises (e.g. a liquidity crisis) but also highly innovative processes which intentionally draw on instability.

The first action that leaders should take in such a chaotic context is to create order. Subsequently, the focus is on sensing where there is total, partial or no stability. Based on that follows an attempt to transform the situation from chaotic to complex. Patterns can then be determined in retrospect to identify possible causes for the crisis and to deduce new opportunities.

Paradoxically, managers sometimes assess merely complex situations as chaotic. Such crisis management without an actual crisis may actively promote disruption, particularly if leaders are not used to dealing with complex situations.

Reality shows that causalities are not always easily identified. In such case, it is essential to avoid knee-jerk reactions based on personal problem-solution patterns. In-the-dark situations call for openness and a thorough understanding of context. This is an increasingly important leadership skill in our rapidly changing world.