Presentations:: Organize for Complexity (updated 3/2015)

Of course it is easy to relate to a growth model, particularly when we have benefited from classical economics but this is only true up to the point where we realise the flaws in economic theory and the failed (morally bankrupt) model that was spread, like an aggressive cancer, through the conduit of global financial networks! Now that we are, all too painfully, aware of the complex, non-linear, world of interconnected financial and business systems that make up our global economy we MUST recognise the limitations of theories based upon ‘linear-thinking’.

If nothing else this new book, A New Approach to a Theory of Management: Manage the Real Complex System, Not its Model may offer some food for thought to those people who appreciate that a ‘shift’ in thinking is required IF we are to attempt to manage organisations whose complexity has, significantly and for some time, exceeded the complexity of the systems of analytics and management we apply to them.

The whole is more than and different from the sum of its parts.

That statement has become a mantra in complexity science. (Mikulecky, 2007 a & b). It is used much more than it is understood. It has deep meaning, and that meaning is the foundation concept for relational systems theory. What does it mean for a whole, made up of material parts, atoms and molecules, to be more than its mere sum? It means a number of interrelated things:

  • It means that if the system is reduced to its parts, or even to subsystems, something real about it is lost. That “something” that is lost can only be identified in the whole system and is related intimately to what we observe when we see the system in action. In other words, we are talking about function. We can call the thing we observe that is lost when the system is reduced a functional component.
  • If the functional component in the whole system is lost even though in the collection of parts we have all the material elements that we had to start with, then the functional component has an existence, an ontology, at least as real as the material parts.
  • The whole system defines a context for the functional component, and that component has no meaning outside the context of the whole system.
  • The functional component in turn gives meaning to the system in terms of its observed actions. Hence, we have a closed causal loop in every whole system. The whole gives the defining context to its functional components, and those functional components define the system of interest.

SME complexityGiven what we now know, WHY do we STILL rely upon measurements that, to all intents and purposes are, essentially, reductionist?

If you think about it logically there isn’t a magical, invisible, ingredient that enables complex systems to deliver performance that is greater than the sum of its parts. So, whilst we can use metrics (such as those illustrated for SME) to gain some insight into the business, individually, even collectively, they tell us very little about the current capacity or capabilities of the whole system.

Ontonix, have developed the means by which this gap in our knowledge can be bridged. It is increasingly understood that the number of INTERDEPENDENCIES, nature and integrity of the [multi-scalar], DYNAMIC (non-linear), INTERACTIONS among networks of complex processes and sub-systems, that take place ‘within’ the system, are what enable function…AND are sources of ‘risk’, that unidentified and unmanaged, are communicated through CAUSAL RELATIONSHIPS [endo. – exo. – endo.: feedback loops] as increased uncertainty e.g. market volatility or financial turbulence.

How can be hope to understand complex, dynamic, systems with capabilities ‘beyond the sum of the parts’ by sampling data relating to the ‘parts’ as if they are not inter-connected?

Sadly the ‘cult’ of conventional business and risk management remain (broadly), wilfully, ignorant of a perspective that is proven in other disciplines: RM as a microcosm of the macro problem of entrusting ‘experts’ to resolve todays problems with yesterdays tools!

You can recognise these people by their ability to distance themselves from wrongdoing and, consistently, unreliable predictions, the virulence with which they attack and attempt to discredit contrarian voices and the nature of the ‘solutions’ they propose. BECAUSE THEY ARE A MAJOR PART OF THE PROBLEMS THEY ARE (still) ENTRUSTED TO RESOLVE!

Plenty of obfuscation about ‘language’, definition or terminology, rhetoric about ‘ring fencing’, calls for greater transparency and accountability but, ultimately, preferring to add complexity in the form of more silly rules in the form of standards and regulations. All, allegedly, intended to protect customers but that, instead, protect the revenues that sustain them. Stripping ‘value’ intended for the customer in the most insidious form of financial abuse!

Perhaps cult-members believe that risk, effectively, dissipates on its own and that applying well-intentioned and practised risk management without understanding unintended consequences (side effects) is acceptable in business but not in medicine? Perhaps volatility is some form of airborne virus, mutated from zombie institutions, that feeds markets but attacks creative (or non-conformist) companies.

Asking the same old questions, to feed the same old models, to conduct reflexive analyses (looking for familiar – risk – patterns: correlations). Working with a classic economic recipe but incorporating some ‘improved’ (processed) ingredients that may damage consumer health but are tasty and highly profitable! To a mix of water and flour add a heaped tsp. of assumption, several splashes of maths, a mixing bowl of computing power and an oven to cook-up some palatable predictions. Altering quantities to suit personal taste is one thing but when vast amounts of societal wealth and security are reliant upon concatenated (linear) calculations in the hands of master-bakers(!), whose priority is to feed their greed by ‘cooking the books’ and leaving communities to fund the healthcare and societal costs.

It makes sense when you think about it! It’s not magic, rather it is the interactions, enabled by the the effectiveness (or otherwise) of the communication of information. Every dynamic system, first, requires the requisite complexity to perform a specific function but, as the following presentations (hopefully) illustrate, how the system is structured can have a significant impact upon performance and profitability.

Excessive complexity is not just an “innovation killer”, in such volatile and uncertain times it can be the difference between failure and survival. If you think of excessive complexity in terms of cholesterol within the most complex systems we know (us!), you may understand the significance of ‘blockages’ upon performance. Particularly when the demands of the external environment can change suddenly…50 years of a sedentary lifestyle then having to run to catch a train or away from danger, may be an appropriate analogy for an established business faced with the loss of a major customer, supplier, a new competitor or an unforeseen change in trading conditions. Sudden and unforeseen – NOT unforeseeable – changes can and have led to collapse and failure even when the outward appearance is reassuringly healthy.

Now that we know about DNA we can better understand the impact of previously ‘invisible’ flaws and that such, apparently, small errors can (in complex systems), literally, make the difference between life, death or a lifetime of ill-health.

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