A
growing number of consultants and academics
are looking at complexity theory, once the domain
of the biological and physical sciences, to
help managers improve the way they lead organizations.
What is complexity theory?
One way to understand it is to look skyward
to the avian maneuverings of birds. A lone bird
follows simple rules of behavior, such as when
and what to eat. However, a group of birds flying
together exhibit complex, unpredictable, creative
behaviors that emerge naturally from the interactions
of individual birds. For example, a flock in
v-formation is able to fly farther and faster
than an individual bird. The flock that is formed
when autonomous agents--birds--interact is known
as a complex adaptive system. To fly in a flock,
a bird need follow only three simple rules:
Don't bump into anything, keep up and stay in
close proximity. Yet following these rules leads
to a cohesive, seemingly complicated group of
birds flying with the speed and precision of
the Blue Angels.
Complexity
theorists argue that managers should allow creativity
and efficiency to emerge naturally within organizations
rather than imposing their own solutions on
their employees. They can do this by setting
some basic ground rules and then encouraging
interactions or relationships among their employees
so that solutions emerge from the bottom up.
Managers can't predict what the solutions will
be. But just as a flock of birds can achieve
more than a bird flying solo, it's likely that
the energy and enthusiasm that are unleashed
when employees are working together will yield
successful results.
Several
researchers and companies are examining how
an understanding of complexity theory can apply
to businesses. Roger Lewin and Birute Regine
are two researchers making headway in this area.
"With the Internet and networks, the extent
of business ecosystems is growing,". "And
the pace at which the landscape within an ecosystem
changes--thereby forcing changes throughout--is
increasing." That's why today's business
climate is particularly ripe for the application
of complexity theory.
How
to manage business complexity?
How do you define complexity theory for business
people?
There
is no simple definition of complexity theory.
Traditionally, business people think about their
worlds in a very mechanistic, linear way that
is [characterized] by simple cause and effect
and is predictable. Most of the world isn't
like that. Complexity theory looks at these
systems in ways that are organic, nonlinear
and holistic.
What
are the principles of complexity theory?
A
few simple rules guide the interaction between
the components of a system. First, in a business
context, managers should attend to relationships
at all levels within their organizations. The
second rule is that small changes can have large
effects. And third, interesting and unpredictable
properties can be expected to emerge from a
system. As a result, it is hard, if not impossible,
to implement a strategic plan for anything but
the short term. A hoped-for direction can be
set but not the ultimate goal.
People
often think of complexity theory as a metaphor.
We certainly don't think of it like that because
that is like saying it's just another fad. What
we're saying is that underlying principles found
in nature apply to human organizations.
So
how does this organic way of looking at things
apply to businesses and other organizations?
It
gives them a different way of looking at their
organizations. Take the property of emergence,
for instance. In computer models based on complexity
theory, when autonomous agents interact and
mutually affect one another, patterns will emerge--an
intrinsic order just waiting to unfold. But
it comes about in a nonlinear way, so the order
can't be predicted. When we translate computer
models into human terms, the autonomous agents
are people and the interactions among them are
relationships. Complexity theory underscores
the importance of relationships. How people
relate to one another affects what emerges in
the organization--the culture, the creativity,
the productivity.
So
if you want a culture that is intrinsically
creative, growing and learning, you have to
look at the relational level: Can people be
real with one another? Is there trust? Do people
acknowledge each other and the good work they
do? In organizations that have relationships
as their bottom line, a culture of care and
connection emerges--and it is palpable. In this
context, people are more willing to change and
are more adaptable because they feel they're
not alone and that together they can manage
most anything.
It
sounds like complexity theory flies in the face
of traditional problem-solving techniques.
The
idea of teamwork has been popular, for instance,
partly because managers believe that people
are happier as members of teams but also because
teams can be highly effective in the workplace.
The traditional approach to [implementing a
team structure] would be for managers to say,
"OK, we're going to make you a team,"
and to expect everyone to fall in with the idea.
This can work, but from what we hear, it often
doesn't work very well because it is imposed
and artificial. When managers genuinely value
relationships in the workplace and truly listen
to people and act on their suggestions, a culture
of care and connection emerges in which people
are highly responsive to the needs of the organization.
Teams can form spontaneously and powerfully
in this context, and the job gets done. It's
much more effective to allow solutions to problems
to emerge from the people close to the problem
rather than to impose them from higher up.
Do
you know of any organizations that have used
complexity theory to solve problems?
At
Muhlenberg Regional Medical Center in Plainfield,
N.J., it took up to 24 hours to admit patients
and give them their first dose of antibiotics.
[The hospital] used a complexity approach--[implementing]
small changes and bottom-up solutions, then
allowing things to unfold--to solve the problem.
The vice president of nursing put together a
diverse team of people--secretaries, doctors,
administrators--to try different things, to
experiment, to make small changes and see how
they could reduce the wait. First they tried
having all the admissions procedures done in
one place. Then they looked at duplication of
services. One thing led to another, and within
only four or five months they had reduced the
admission time to one hour. No one could have
anticipated that the new way of doing admissions
would have emerged so quickly and so efficiently.
How
does complexity theory apply to strategic planning?
Everybody
knows that in most industries long-term strategic
planning is near impossible, and this is often
viewed as a failure on the part of management.
When you recognize that the business environment
is a complex system that is inherently unpredictable,
you understand that the failure of long-term
strategic planning is not a failure of management
but an expected outcome of the business environment.
The challenge for managers is to feel comfortable
merely setting the direction for the future
and to be ready to adapt and evolve as the environment
changes.
The
Industrial Society, a London-based business
consultancy, was on the brink of financial collapse
three years ago. A new CEO was brought in, and
he said, "Forget about a strategic plan.
The first things to get right are the relationships
among top management." He then asked the
workers in the lower levels of the organization
what they thought they could achieve in their
wildest dreams. Some responded with wildly unrealistic
profit targets--and many were met. The energy
tapped was incredible because a project was
available for anyone who wanted to participate
[on a team], whether it was a secretary or top
manager. The company is now financially healthy.
Traditional
consultants who are in the business of providing
solutions may find themselves at odds with complexity
theory.
Many
consultants often get in the way of emerging
solutions because of their need to prove they
have answers. There is a role for consultants,
but it's a very different kind of role and leadership.
How
should the role of consultants change?
Of
course, corporations will always need consultants
to go in and fix many operational problems,
such as line scheduling. But when you are dealing
with organizational issues, particularly those
that require change, it's appropriate to consult
in a different way. A complexity theory perspective
is particularly helpful to disheartened, disconnected
companies where workers lack commitment--rather,
they just watch the clock and work to pick up
a pay check. For instance, a big steel-making
company in Australia was having terrible industrial
relations problems, with workers and managers
battling each other. Not surprisingly, productivity
was way below its potential. Consultants went
in and simply got people talking to each other.
Before very long, these big, muscular Aussies
were building relationships with each other.
Workers and management began to empathize with
each other's problems. And productivity went
up 20 percent. The consultants didn't have a
strategic plan to increase productivity by a
certain amount. They attended to relationships,
as the complexity approach says, and the productivity
enhancement followed.
Wouldn't
the role of executives have to change as well?
CEOs
and CIOs are used to thinking that they have
to have all the answers, that they are in control
of everything. Well, control is not something
you can have over a complex system, at least
beyond some very general parameters. So yes,
executives do have to change. They have to give
up the illusion of control and concentrate instead
on setting a larger vision for their organizations
so that the creativity of their people can emerge.
It's
not about saying let's look at business organizations
as if they are complex systems. They are complex
systems. Managers have been operating within
them in a very controlling way, which dampens
the potential creativity of employees. What
we're saying is shift the way you [lead] organizations,
loosen control to encourage more creativity.
A culture of care will emerge, as opposed to
a culture of command and control, and your company
will be more creative and productive, too.
What
are the qualities executives need in order to
be successful in a complexity environment?
Be
accessible, respond immediately to others, acknowledge
and value people's contributions at all levels,
create opportunities for people, take the time
to build trusting relationships and walk the
talk--you are the embodiment of the organization's
values. If you can't be honest, then how can
you expect others to be? [Wouldn't dishonesty]
affect the culture, the organizational identity
and how you develop relationships with other
organizations? It all starts with you.
Are
there any qualities employees need to have in
a complexity environment?
The
people on the front lines have to conquer the
fear of freedom that comes when they are given
the leeway to do something important.
What
about organizations? Are there particular qualities
that characterize a complex adaptive system?
There's
a tendency in business to focus at the macro
level. One thing complexity theory says is that
the most powerful processes happen at the micro
level--the people, relationship dimension. [To
initiate these processes,] start small, experiment,
include others and promote a "just try
it" environment. Set up a few simple rules,
then let go. Small successes will [encourage]
other people to start pilot projects, and a
comfort with change will catch on.
Complex
adaptive systems have three ways of functioning.
There is the stable zone, in which the company
is in a state of inertia, not responding to
opportunities nor adapting to changes. However,
stability is not something to strive for because
it leads to an unresponsive system. Then there
is the chaotic zone, in which the organization
is bouncing off the walls, haphazard, led by
events rather than choices and overreacting.
And there is a zone in between these two, the
creative zone, which is the place to be--not
so stable that [little] changes, nor so unstable
that everything falls apart. There's a lot of
fluctuation in the creative zone--ups and downs
and paradoxes keep occurring. For example, leaders
in complex adaptive systems need to be strong
and have vision, yet they also need to be comfortable
managing with a hands-off approach. Also, companies
may know the direction in which they're moving,
but they don't know exactly where they will
end up. Creativity emerges from tolerating such
ambiguity.
And
what about Technology?
The
link between corporate performance and effective
information technology (IT) management is clearly
emerging. Companies that are leaders in their
markets and industries (“Market Leaders”)
are better at using IT to enable business strategy.
Market Leaders deploy IT more strategically,
and in doing so maximize the impact IT has on
corporate performance.
In
this economic downturn, Market Leaders are spending
the same amount on IT as other companies, but
are spending more strategically. In the past,
they invested more than other companies to automate
and transform business processes. In challenging
times, Market Leaders are better able to adjust
spending levels to economic conditions. By investing
more during up-cycles, they can invest less
during down-cycles and still benefit from better
business performance—in part due to greater
IT automation.
Annual
IT spending by survey respondents ranges from
2% to 10% of revenue. On average, the companies
in our survey spend 70% of their budgets on
operating and maintaining existing IT systems,
and 30% implementing new systems. In this we
found no significant difference between Market
Leaders and other companies. The ongoing operational
cost of a new system can be over 20% of its
implementation cost. Moreover, companies that
reduce their IT budgets or keep them flat also
cut new systems investment more than they cut
ongoing operating expenses. As a result, new
business capabilities are sacrificed at the
expense of fixed operating costs, which negatively
affects business value and growth. Companies
that can control these ongoing operating costs
have a competitive advantage.
Most
companies apply an arms-race mentality to IT
investment, calibrating their total IT spending
to industry benchmarks. But the Market Leaders
distinguish themselves by how they invest in
IT, most notably in strategy, governance and
implementation.
