27 Manufacturing fitness and NK models I. P. McCarthy Organisational Systems and Strategy Unit. Warwick Manufacturing Group University of Warwick, Coventry, UK CV4 7AL Tel 00 44 2476 573136 Email i.p.mccarthy@warwick.ac.uk ABSTRACT NK models and the “landscape” metaphor have recently attained popularity within the management research community as an approach for visually mapping the strategic options an organisation could pursue. This paper explores how this theory relates to competitiveness and strategy and proposes a definition and model of manufacturing fitness. In accordance with fitness landscape theory, this paper adopts a complex systems perspective by which to view manufacturing organisations and understand their capabilities. This paper also argues that manufacturing organisations are a specific type of complex system – a complex adaptive system and that by developing and applying fitness landscape theory it is possible to create models that will help manufacturing managers formulate appropriate strategies by searching and selecting various combinations of capabilities. 1.0 INTRODUCTION What exactly do the terms “fit” and “fitness” mean? This question is the motivation and starting point of this paper. It is addressed by viewing manufacturing organisations as complex adaptive systems and by utilising fitness landscape theory. Several researchers (Maguire, 1997); (Merry, 1999); (Beinhocker, 1999); (Reuf, 1997) and (Rivkin, 1997) propose that fitness landscape theory is an appropriate theory for investigating and understanding strategy, but these articles avoid any formal discussion on the definition and concept of fitness. Instead there is an implicit assumption that fitness relates to competitiveness and effectiveness. With this introduction, the contribution that this paper makes is to (i) explore how a complex systems framework can be used to understand the role of evolution in manufacturing competitiveness and survival; (ii) provide a definition of manufacturing fitness that could be used to explore and formulate manufacturing strategy options and (iii) conclude with summary points to help understand and manage the evolution of a manufacturing organisation. 2.0 MANUFACTURING AND COMPLEX SYSTEMS THEORY In recent years the study of systems has developed with input from various disciplines to become known as complex systems theory (see Anderson, 1999; Choi et al, 2001; Dooley and Van de Ven, 1999; and Morel and Ramanujam 2001) or, as some call it, complexity theory. This branch of systems thinking is concerned with understanding the relationship of the system whole and the system parts as the system evolves, learns and adapts. For instance, the traditional mechanistic and reductionist approach to systems seeks to understand them by reducing the whole system (e.g. the whole manufacturing organisation) into manageable individual parts (e.g. manufacturing departments). By studying these individual parts of the system, managers attempt to formulate theories