An innovation-based approach for coping with increasing complexity in the global economy

The strategic differentiation usually needed to compete in the global economy introduces new complexity in a firm's internal and external environment, in the form of new players and new interactions. To cope effectively with such new complexity leadership must rely increasingly on innovations related to new products/services, to new business processes and to new business models. Two major categories of complexity refer to environmental complexity that affects strategic decisions on how to compete and operational complexity on how to solve the problems emerging in implementing a strategy. This paper explores methods to identify the various kinds of complexity present in both categories and a general approach to reduce it and optimise it, as a firm pursues the strengthening of its competitive advantage.