Business and complexity

April 9, 2013

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Up to now, we have seen the world around us as systems that, we thought, could be described and understood by identifying rational causal links between things: if I choose X, then it will lead to Y. If, on the other hand, I choose A, it will lead to B. We are accustomed to drawing boxes and arrows between those boxes. We try to model the world as predictable processes based on knowing how things are and how they will be. We want to be certain, and we think we are.

Management thinking is based on the sciences of certainty. The whole system of strategic choice, goal setting and choosing actions to reach the given goals in a controlled way depends on predictability. The problem is that this familiar causal foundation cannot explain the reality we face. Almost daily, we experience the inability of leaders to choose what happens to them, to their organizations – or to their countries. Things may appear orderly over time, but are inherently unpredictable. We live in a complex world.

Complex systems are, as their name implies, hard to understand. Social systems, like organizations consisting of people, are accordingly complex and hard to understand. There is no linearity in the world of human beings. There are no arrows and people are not boxes, or fit inside of boxes. This is why our thinking needs to develop from the sciences of certainty to something more applicable, the sciences of uncertainty, the sciences of complexity.

Complexity refers to a pattern, a movement in time that is, at the same time, predictable and unpredictable, knowable and unknowable. Chaos theory explains how these patterns form. A parameter might be the flow of information in the system. At low rates, meaning no input or more of the same input, the system moves forward displaying a repetitive, stuck behavior. At higher rates and more diversity the pattern changes. At very high rates the system displays a totally random behavior. The pattern is highly unstable. However, there is a level between repetition/stability and randomness/instability. This level where simultaneous coherence and novelty are experienced is called the edge of chaos.

Classical physics took individual entities and their separate movement (trajectories) as the unit of analysis in the same way we have analyzed and rewarded individuals. Henri Poincaré was the first scientist to find that there are two distinct kinds of energy. The first was the kinetic energy in the movement of the particle itself. The second was the energy arising from the interaction between particles. When this second energy is not there, the system is in a state of non-dynamism. When there is interactive energy, the system is dynamic and capable of novelty and renewal.

Interaction creates resonance between the particles. Resonance is the result of coupling the frequencies of particles leading to an increase in the amplitude. Resonance makes it impossible to identify individual movement in interactive environments because the individual’s trajectory depends more on the resonance with others than on the kinetic energy contained by the individual itself.

We are the result of our interaction. We are our relations.

The conclusions are important for us: firstly, novelty always emerges in a radically unpredictable way. The smallest overlooked variable or the tiniest change can escalate by non-linear iterations into a major transformative change in the later life of the system.

Secondly, the patterns are not caused by competitive selection or independent choices made by independent agents. Instead, what is happening happens in interaction, not by chance or by choice, but as a result of the interaction itself.

The new social technologies have the potential to influence connectivity and interaction as much as the sciences of complexity are going to influence our thinking. The task today is to understand what both social business and complexity mean. The next management paradigm is going to be based on those two, at the same time.

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John Hagel on “harnessing the power of randomness” and “resilience

4 Responses to “Business and complexity”

  1. Jon Husband Says:

    The new social technologies have the potential to influence connectivity as much as the sciences of complexity are going to influence our thinking. The task today is to understand what both social business and complexity mean.

    The next management paradigm is going to be based on those two, at the same time.

    Yes.

    I am reminded of the following quote by Stan Davis in the book Future Perfect (1987) .. the last two paragraphs of Chapter 3 ;-)

    It’s part of what got me started thinking about what I call ‘wirearchy”.

    “Electronic information systems enable parts of the whole organization to communicate directly with each other, where the hierarchy wouldn’t otherwise permit it. What the hierarchy proscribes, the network facilitates: each part in simultaneous contact with all other parts and with the company (see expanded definition above)as a whole. The organization can be centralized and decentralized simultaneously: the decentralizing mechanism in the structure, and the coordinating mechanism in the systems.

    Networks will not replace or supplement hierarchies; rather the two will be encompassed within a broader conception that embraces both.”

    I think that management philosophy and protocols / practices will perforce necessarily (and eventually) have to follow this direction and the dynamics engendered.

  2. eskokilpi Says:

    Yes, thank you John


  3. Really good though slightly dodgy on the accuracy of what resonance means.

    The bigger issue is that the fundamental structure of information has ‘obverted’. When I was born almost all information was limited to its inscription on an object – a piece of paper. It was also generally assumed to have one meaning because it existed mostly in one system – that which originated it. For example Births & Deaths registry, letters, records of meetings.

    Now any individual element (such as this comment) can exist immediately in many systems simultaneously. My hard drive, yours, the server, my hard copy print-out, twitter, an email, or if someone reads it aloud to a phone camera, on YouTube.

    What happens is that organisational structures follow the structure of information.

    So we are beginning to experience new formations organising around tasks and reflecting not the hierarchy of information but its hyperlinked nature.

    Against this is our desire for order and certainty, which leads us to force information into shapes that feel safe and organisations that feel secure. Neither are.

    We can sit at the edge of chaos, which is fun. We can also think of how to frame new ‘attractors’, zones around which systems orbit. This will yield new organisational types. We need to be a bit careful because – as with fish stocks, global warming and a couple of other systems – the new stable state may turn out to be a bit vicious for some communities.


  4. […] starting to come to terms with what my good friend Esko Kilpi brilliantly wrote about at “Social Business and Complexity” not long ago and which I am going to take the liberty of quoting over here as […]


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