Business & Risk Management:: redefining ‘steps to success’


English: This is a visual, organizational map ...

English: This is a visual, organizational map of complex systems broken into seven sub-groups. (Photo credit: Wikipedia)

You may fully understand the products and services that your business supplies, even: how it operates – it’s many complex processes; who it’s key personnel, suppliers and customers are; it’s finances; be ‘sensitised’ to the early signs of (ever-present) opportunities and threats in the marketplace and; be well practised in the application of the tools and techniques of management BUT, here is the bad news: ALL OF THAT MAY STILL NOT BE ENOUGH, particularly if underlying theories or organisational structure are sources of unidentified and (therefore) unmanaged risk!!!

I have written plenty on the subject in an effort to convey the message that each business is wasting valuable resources to treat the symptoms of what WE have created and keep adding to [unintended consequences] at an ever-increasing pace whilst failing to address the root cause.

I am the first person to ask, “why should anyone listen to me” when there are so many people far better qualified to provide guidance?

It is a perfectly fair question. So PLEASE bear with me whilst I try to explain. I realised some time ago that I am a born contrarian. So, when it comes to conventional ‘wisdom’ my instinctive response is NOT to accept and apply but to question and seek clarification. It doesn’t, necessarily, endear you to too many of the quick-fix merchants in the prevailing culture! But, from the evidence, I would suggest that WE would all be better served with such an approach.

Regulation and control are the most important processes in Nature. Understanding these processes is fundamental to the continuous existence of all organizations – biological, mechanical and social. The existence of any organization directly depends on the ability to transfer and correctly process information. 

All biological, mechanical and social systems transfer and process information in a similar manner.

Prof Norbert Wiener, MIT

I am not decrying or dismissing all that we have learnt from years of careful analysis. What I aim to do, using a mix of irrefutable laws of Physics and the kind of analysis that you just won’t get from the vast majority of business (and risk) managers or  consultants, is illustrate: NOT what has been learnt is wrong but that before we can apply our knowledge we must, first, appreciate the extent to which the ‘business systems’ we presume to manage have fundamentally changed. Of course they have. The world has changed significantly in the last 50 (even 30) years and the failure to anticipate, or adapt to, these changes has seen the demise of many once great organisations.

Simply put, businesses in modernity are highly complex. They NEEDED to evolve and adapt to compete and survive in the Digital Age. Outwardly they may not appear to have changed but, operationally, they have moved far beyond the complicated, linear, systems of, even, 20 years ago.

Technology has transformed our world yet we take so much of it for granted. Perhaps, because the products that rely upon electronics and communications are so much smaller than advancements of the past, the incredible complexity is not always fully appreciated. Vital networks of interdependent sub-systems are ‘hidden’ by sleek, functional, design and simplified controls.

Regulation and control are the most important processes in nature. Understanding these processes is fundamental to the continuous existence of all organizations – biological, mechanical and social. 

The existence of any organization directly depends on the ability to transfer and correctly process information. 

All biological, mechanical and social systems transfer and process information in a similar manner.  

Prof Norbert Wiener, MIT

Attempts to satisfy the financial demands of a flawed model can constrain a business system. Unwittingly: adding complexity; increasing risk and uncertainty; reducing resilience.  The Law of Requisite Variety

Unless we possess an understanding of the ‘hidden structure’ – that is revealed through identifying the multiple interdependencies – efforts to ‘manage’, no matter how well-intentioned, can have the opposite of the desired effect.

  • Information is a critical tool for operating in an organization (per Prof Weiner) cybernetic models argue that information is processed over time rather than in a single, static event. So, “behaviour, learning, and the nature of the cognitive processes themselves may be altered by feedback” (Lord & Maher, 1990, p. 15). These models consider the future, the present, and the past. Through learning and adaptation, the cybernetic model allows a heuristic answer to be considered and applied over time. .
  • Business systems are not exempted from the effects of the 2nd Law of Thermodynamics – they are entropic so require ongoing regulation/management.
  • Per Dave Snowden, “Practice without sound theory will not scale”
  • The Law of Requisite Variety (Ashby’s Law)- refer to graphic

     

“If your theory is found to be against the second law of Thermodynamics I can give you no hope; there is nothing for it but to collapse in deepest humiliation.”

– Sir Arthur Eddington, British Astrophysicist

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