Business environments are described or analysed in various ways based on disparate important dimensions. However, the concept of turbulence is ambiguous. This confusion touches on the varying orientations in studying organisational environments and the diverse methods that are used to measure it.
Environmental turbulence underscores the extent of change and degree of complexity in a business environment. Changes in technology, statutory regulations, or environmental factors are some of the examples that constitute environmental turbulence. Therefore, a turbulent environment is dynamic, expanding, unpredictable, and fluctuating. In addition, such an environment displays high levels of interconnectedness with the business. Turbulence is a complex interaction of several dimensions that are related to change where some elements dominate others or overlap each other at times.
The figure below shows the configuration of the main dimensions of environmental turbulence.
1. Dynamism
If the components of the tasks of the environment are highly variable, the business needs to be flexible. Dynamism in this case refers to the extent to which the components of the environment of a business unit remain constant or changing over a given period. Consequently, this dimension varies from static to dynamic. For instance, a dynamic environment may be defined by technological changes, varying customer preferences, and frequent entrance and withdrawal of competitors. In environmental dynamism, the frequency of environmental change is not differentiated from the intensity of the changes. However, changes in the business environment can occur very fast, but with low intensity. A good example of this scenario is how demand sometimes fluctuates on a daily basis. Similarly, there can be substantial changes happening with less frequency. From this description, the dynamism dimension of environmental turbulence has frequency and intensity of changes as its two sub-dimensions.
2. Complexity
The complexity of an organisation’s environment is subject to the number of elements in that particular environment. The environment has a large number of elements that are involved in its complexity. The complexity dimension applies well to the organisations with a sizeable range of special products, which receive various types of clients and have markets spread over wide geographic areas. The interaction of the environmental elements leads to environmental complexity. In a case where the environmental components have few interdependencies (interaction), it is easy to subdivide them into homogeneous groups. As an example, a business that has varied clients, like domestic consumers, industrial, or governmental clients, could segment them into distinct groups. This aspect reduces the complexity of handling the clients. However, segmentation is not possible if there is a strong relationship amongst the many business environmental elements. Therefore, the environment is very complex. Therefore, the complexity of the organisational environment depends on the number of elements involved coupled with how they are related.
3. Predictability
Predictability or uncertainty covers the two dimensions discussed above. The business environment can be very dynamic and complex, but predictable at the same time. Unpredictability reflects the degree to which the relationships between the cause and effect concerning the environmental elements are incomplete. When the variability of the environmental elements is linear or cyclical, this dimension can help the management to predict future developments by extrapolating the available trends. Nevertheless, in many business environments, data regarding future developments is not clear. The data available might show discontinuities in business trends, but fail to show when these will occur and in what direction.This aspect might force the management to ignore certain data, which may be relevant. Therefore, such an environment is relatively unpredictable. In such unpredictable environments or where data is unavailable, the management has to be flexible. The predictability dimension has two sub-dimensions, viz. predictability and the availability of information about the changes in the environment.
Case Study Example
This article is going to take a case study of the storage battery industry, which has the potential of becoming a multi-billion dollar industry. Innovations in this industry could help customers in times of power outages and as alternative power sources during peak hours.
The greatest challenge facing this industry is the pricing of the batteries and making a scalable package. The demand for these batteries depends on the market coverage and statutory regulations. For instance, these batteries could form alternatives to solar panel users who can sell excess kilowatts to their local grids.
In some markets, utility providers try to push back extra surcharges, thus causing resistance to users. These storage batteries could succeed in markets experiencing high prices in energy. The highest adoption of storage batteries is expected among large commercial buildings and the residential sector.
The large commercial buildings suffer from the demand charge that is levied by power generating companies, which charge proportionally to their peak consumption. For these users, the batteries could help them because they can be charged during off-peak and be used during the peak. This move could help them to earn incentives from demand response programs offered by utilities.
An example of demand-response program participants is the University of Pennsylvania. When electricity prices increase, the regional transmission operator calls to inform the university. The University responds by switching off heavy energy devices like chillers. Therefore, batteries are a good alternative to respond to energy spikes. Battery technology could bring a paradigm shift in how people think of energy.
In response to this emerging opportunity, several battery manufacturers are forming joint ventures in a move to come up with a lithium-ion battery technology. There have been advances in this direction, which has reduced the cost/kilowatt hour from $1850 in 1999 to $500 in 2006.The industry players expect that with the technological and manufacturing improvements, highly compact models will be produced to cover various markets.
The increased optimism about the future of storage batteries has attracted many start-ups in the battery manufacturing industry with expanding variety of lithium ion technology. However, as the future uptake of batteries for storage is not very clear, as manufacturers are not aware of the capacity levels. Therefore, the future success of the industry remains a function of the resulting interplay amongst the dynamics in the battery industry.
Using the models of environmental turbulence, the industry is summarized below