“We have met the enemy and he is us.”— Walt Kelly
“Fools ignore complexity. Pragmatists suffer it. Some can avoid it. Geniuses remove it.”— Alan Perlis
“Out of intense complexities, intense simplicities emerge.”— Winston Churchill
“I think the next century will be the century of complexity.”— Stephen Hawking
“Complexity is your enemy. Any fool can make something complicated. It is hard to keep things simple.”— Richard Branson
“Expansion means complexity and complexity decay.”— C. Northcote Parkinson
Complexity is everywhere today. For the most part, it is hidden. We know it exists because “we” made it. What exactly have we made?
Black swans as you all know are events or situations that are unforeseeable and that have huge negative impacts. They are nasty big surprises when they show up.
Complexity as a “potential black swan” is foreseeable but not in detailed nature, magnitude, or timing. Grey swan maybe?
Tim Maughan writing in medium.com captures the essence here very nicely: “The Modern World Has Finally Become Too Complex for Any of Us to Understand”:
“I am here to tell you that the reason so much of the world seems incomprehensible is that it is incomprehensible. From social media to the global economy to supply chains, our lives rest precariously on systems that have become so complex, and we have yielded so much of it to technologies and autonomous actors that no one totally comprehends it all. In other words: No one’s driving.”
Or maybe it’s that too many people are driving?
Complexity doesn’t just happen. It is a consequence of things doing whatever things do. Especially things like people, a few billion of them, doing pretty much their own thing. Their interactions naturally generate complexity.
This means that increasing complexity is actually the normal order of life. Living mostly creates complexity until whatever is created by interactions blows up. Then some degree of simple returns. For a while.
Simple systems have few interactions and are generally predictable. Complex systems are highly and often invisibly interconnected. This can prove disastrous:
“The 2008 financial meltdown, for example, can be traced to numerous distinct but interconnected events: the relaxation of banking regulations, the invention of instruments that allowed lenders to shift risk off their balance sheets, monetary policies that kept interest rates low, the evaporation of reasonable credit standards and conventional down-payment requirements, ignorance on the part of borrowers, and so on. As we have now painfully learned, many observers could see some of these elements, but almost no one saw them all or anticipated the consequences of a drop in housing prices on the entire economic system.”
Dangerous levels of complexity can be invisible
Disaster in the form of a black swan is quite often the first indication of excess complexity. From a management viewpoint, this is not a good way to find out. Unfortunately, there are really not many effective ways to gauge complexity levels. Here is a truly excellent article on this broad topic:
Harvard Business Review in 2011 addressed the growing problem of complexity in business: “Learning to Live with Complexity”:
“It is very difficult, if not impossible, for an individual decision maker to see an entire complex system. This is essentially a vantage point problem: It’s hard to observe and comprehend a highly diverse array of relationships from any one location.”
“Complex systems, by contrast, are imbued with features that may operate in patterned ways but whose interactions are continually changing. Three properties determine the complexity of an environment. The first, multiplicity, refers to the number of potentially interacting elements. The second, interdependence, relates to how connected those elements are. The third, diversity, has to do with the degree of their heterogeneity. The greater the multiplicity, interdependence, and diversity, the greater the complexity [emphasis added].”
“Complex systems have always existed, of course—and business life has always featured the unpredictable, the surprising, and the unexpected. But complexity has gone from something found mainly in large systems, such as cities, to something that affects almost everything we touch: the products we design, the jobs we do every day, and the organizations we oversee. Most of this increase has resulted from the information technology revolution of the past few decades. Systems that used to be separate are now interconnected and interdependent, which means that they are, by definition, more complex.”
“Complex organizations are far more difficult to manage than merely complicated ones. It’s harder to predict what will happen, because complex systems interact in unexpected ways. It’s harder to make sense of things, because the degree of complexity may lie beyond our cognitive limits. And it’s harder to place bets, because the past behavior of a complex system may not predict its future behavior. In a complex system the outlier is often more significant than the average.”
Agile, adaptable management processes may be part of the answer
Behavior of a truly complex system is almost impossible to predict. Worse yet, the degree of complexity existing at any time is mostly invisible. Perfect weather for black swans.
As I have suggested a number of times in these posts – HERE, HERE, and HERE – black swan days can only be handled effectively by a carefully designed, agile, adaptable set of critical business processes.
Unlike the distant past – such as way back in 2019 even – when the world was more or less stable and largely predictable. Well-behaved even, in most instances. Not so anymore. For how long? Who knows? Perhaps forever.
Today, organizations of all kinds need to be quickly and resiliently responsive to whatever comes along. It’s the “whatever” part that bites here. How can you respond to something you can’t see until it happens?
Complexity makes the problem even worse. Much worse.
System simplification should be added to the management process mix
Complexity doesn’t go away on its own. Not nicely, anyway. It can be left to blow up on its own or a management process can be initiated to dig out and mitigate at least some of the complexity. This is very different from agility and adaptability.
Exactly how might one go about this?
- Minimize the need for accurate predictions
As Yogi reminded us, “it’s tough to make predictions, especially about the future”. Significant actions based on shaky predictions can have bad, often very bad, consequences. And “shaky” is only visible after the fact. One approach here is to break initiatives into a series of small steps in order to learn in real time about the system, its response to your step actions, and its current direction of change. Predictions get you started but thereafter the stepwise process gives you vital, timely information about how next to proceed. No predictions involved in many cases.
- Add redundancy
Things break. Often unpredictably and inconveniently. Complex things have a nasty tendency to break without warning. Adding redundancy adds costs in most cases but these can be weighed against the costs from failure of the system (i.e., a business unit).
- Decouple to reduce interdependency
This goes directly at the source of most complexity: interconnections. Adding redundancy can move partly toward this goal but even newly-redundant parts can be heavily interconnected both internally and externally. You need to identify significant interactions – where these are and what alternatives may exist for their elimination. A dynamic systems model can be of value in this effort.
- Small steps to test impacts and discover system behavior
In a world of great uncertainty and volatility, it is nearly always smart to move in small, low-risk steps whenever possible. Small steps can give you vital immediate feedback on how your system behaves under a current plan of action and can allow for mid-course adjustments.
- Ensure team thinking diversity
Avoiding groupthink is generally a good idea but it is especially important when things are changing quickly and unpredictably. You need to have both diversity of inputs and a special effort to avoid groupthink.
- Diversify materials sourcing
Supply chain problems today are especially fierce. Why? Because the efforts in past to reduce costs have created highly brittle supply chains for many vital production and operating materials. Smart in a stable world but potentially deadly in our new non-stable environment.
- Use simulation models to understand systems
Complex systems behave in many non-intuitive ways. These can be impossible to understand adequately. In a growing number of situations, the only practical solution is dynamic system modeling. From sciencedirect.com: “Systems dynamics models are continuous simulation models using hypothesized relations across activities and processes. Systems dynamics was developed by Forrester in 1961 and was initially applied to dealing with the complexity of industrial economic systems and world environmental and population problems.”
Disaster in the form of a black swan is quite often the first indication of excess complexity. Number of system elements, their degree of interdependence, and their diversity drive complexity. Unfortunately, there are really not many effective ways either to gauge complexity levels or to reduce them effectively. Outlined above are a few ways to help deal constructively with existing complexity before it morphs into a black swan event.
Complexity, along with volatility, uncertainty, and ambiguity, has been a central concern of military planners since 1987 and based on leadership theories of Warren Bennis and Burt Nanus. From Wikipedia:
“Volatility, uncertainty, complexity and ambiguity — VUCA is an acronym – first used in 1987, drawing on the leadership theories of Warren Bennis and Burt Nanus – to describe or to reflect on the volatility, uncertainty, complexity and ambiguity of general conditions and situations. The U.S. Army War College introduced the concept of VUCA to describe the more volatile, uncertain, complex and ambiguous multilateral world perceived as resulting from the end of the Cold War. More frequent use and discussion of the term “VUCA” began from 2002 and derives from this acronym from military education. It has subsequently taken root in emerging ideas in strategic leadership that apply in a wide range of organizations, from for-profit corporations to education.”
“VUCA world shows the unpredictable nature of the world at stake like the situation of COVID 19 we are in right now. The deeper meaning of each element of VUCA serves to enhance the strategic significance of VUCA foresight and insight as well as the behaviour of groups and individuals in organizations. It discusses systemic failures and behavioural failures, which are characteristic of organisational failure.”
V = Volatility: the nature and dynamics of change, and the nature and speed of change forces and change catalysts.
U = Uncertainty: the lack of predictability, the prospects for surprise, and the sense of awareness and understanding of issues and events.
C = Complexity: the multiplex of forces, the confounding of issues, no cause-and-effect chain and confusion that surrounds organization.
A = Ambiguity: the haziness of reality, the potential for misreads, and the mixed meanings of conditions; cause-and-effect confusion.”
“These elements present the context in which organizations view their current and future state. They present boundaries for planning and policy management. They come together in ways that either confound decisions or sharpen the capacity to look ahead, plan ahead and move ahead. VUCA sets the stage for managing and leading.”
“The particular meaning and relevance of VUCA often relates to how people view the conditions under which they make decisions, plan forward, manage risks, foster change and solve problems. In general, the premises of VUCA tend to shape an organization’s capacity to:”
> Anticipate the Issues that Shape
> Understand the Consequences of Issues and Actions
> Appreciate the Interdependence of Variables
> Prepare for Alternative Realities and Challenges
> Interpret and Address Relevant Opportunities”
“For most contemporary organizations – business, the military, education, government and others – VUCA is a practical code for awareness and readiness. Beyond the simple acronym is a body of knowledge that deals with learning models for VUCA preparedness, anticipation, evolution and intervention.”
MIT Sloan Management Review in 2007 made a very clear statement about how complexity arises and damages organizations: “Understanding and Managing Complexity Risk”:
“How Complexity Breeds Fragility. As companies increase the complexity of their systems — products, processes, technologies, organizational structures, contracts and so on — they often fail to pay sufficient attention to the introduction and proliferation of loopholes and flaws. As a result, many firms are continually making fixes, which then adds to the total cost of ownership and often creates new problems. One estimate is that 20%–50% of all fixes to software bugs introduce new, unknown problems. Moreover, backward compatibility in software and other products might be desirable to consumers, but it in fact creates the conditions for brittleness. Vincent Weafer, senior director at Symantec Security Response (a division of Symantec Corp., based in Cupertino, California) has warned that making Microsoft Corp.’s new operating system, Vista, compatible with earlier versions of Windows creates vulnerabilities.”
“To exacerbate matters, the possibility of random failure rises as the number of combinations of things that can go wrong increases, and the opportunity for acts of malicious intent also goes up. Build new applications on top of legacy systems, and errors creep in between the lines of code. Merge two companies, and weaknesses sprout between the organizational boundaries. Build Byzantine corporate structures and processes, and obscure pockets are created where bad behavior can hide. Furthermore, the enormous complexity of large systems like communications networks means that even tiny glitches can cascade into catastrophic events.”
“The Inevitability of Disaster. In fact, catastrophic events are almost guaranteed to occur in many complex systems, much like big earthquakes are bound to happen. Indeed, the statistics of events in manmade systems is starting to closely resemble that of destructive natural phenomena. Consider the massive blackout that occurred on August 14, 2003, when a power line tripped somewhere in northeastern Ohio. That tiny accident triggered a series of cascading failures that propagated throughout the sprawling, complex, interconnected North American power grid, costing the United States between $4 billion and $6 billion, according to the U.S. Department of Energy. John Doyle, a mathematician at the California Institute of Technology in Pasadena, examined data from the incident and found that the blackout was no statistical anomaly: It was bound to happen, even “overdue.” Although the DOE might disagree with that assessment, the fact is that regulators and policy-makers are currently ill-equipped to design and administer such complex systems. (Through a postmortem analysis, the DOE would later learn that northeastern Ohio is an electricity choke point, to both Michigan and the upper Midwest as well as to New York and Pennsylvania to the east.)”