While there’s some exceptional writing about complexity in business, there’s not enough. Too many business writers and consultants work hard to force complexity into neat and tidy boxes according to traditions of management science. Except complexity is NOT a tame discipline and the value of complexity lies outside what management science understands.
In my last post, I discussed how setting up science and its fields causes us to ignore important ways the world works — and how complexity science helps us peer inside these areas of unexpected behavior. At core, complexity science comes to grips with how things come about when the whole is more than, or different than, a sum of the parts. Perhaps that idea sounds simplistic. It’s not. Once we can no longer simply add up the results of the individual parts (the reduction assumption), then those forces at work are far more difficult to grasp.
Management science and its fields similarly ignore important ways business works — because they attempt to be science. Consider management science’s fundamental beliefs that (1) business success comes through logic and analysis, that (2) orderly operations are the most effective operations, that (3) centralized planning drives the best business success, and that (4) it is more important to know generalized business techniques than to understand specific industries. None of this is true and these ideas, along with others, limit management science to comprehending only those situations where the whole result is equal to a sum of the parts.
Yet for a business to succeed, the whole must be more than a sum of the parts — something which happens well outside the linear mindset of management science. Of course, the world has always worked this way. So a great many in businesses have arrived at a successful whole without knowing about the complex — deeper understanding of these areas is recent. Sometimes that success resulted from executives, founders, or key employees with excellent instincts for what we now know is the complex. These seem to be the situations where the company achieves the most success. More often, companies arrive at a successful whole when the complex works in a business’s favor by accident. Unaware of this good fortune, these companies then issue press releases creating company mythologies claiming that their success was intentional though it never was.
The Whole Result of Doing Business
Complexity, then, helps pull back the curtain on the unusual, unexpected, and mysterious ways in which parts come together to result in something far more than or far different than merely their sum. Why do I say this is required for success? Consider one of our most fundamental measures: profit. By definition, there is no profit if bringing together the parts is only a sum — the degree of our profit reflects the degree to which our business is more than a sum of parts. Considered another way, we build no competitive advantage if the whole we create is not far more than a sum of the parts.
The whole result, though, is not always different from the parts in a good way. Business actions quite often deliver less than the sum of the parts — less than they should — for many reasons. Bureaucracies, for example, drain energy from activities so that each activity ends up less effective than it should be. Sometimes market forces range against a company allowing little power to come from their actions as when the invention of the smartphone drained Kodak’s power (it was the smartphone which put Kodak essentially out of business — not “digital”). Morale may drain departments to a point where their work delivers less effect than the effort they put in. And poor management of projects leads a whole which can be far less than the parts which went into it. The list goes on.
Our Challenge in Complexity
In business, then, we must learn to leverage complexity to our benefit while also managing aware of it to avoid the disasters it can bring. This is made far more problematic, though, because complexity follows none of the well behaved expectations taught in business education.
As a start, we cannot directly observe the whole as it comes together nor can we list a precise set of attributes saying “this is the whole.” Instead, the whole emerges, evolves, comes into being. Sometimes we can only perceive the whole later and from a distance. Its emerging nature means we are regularly surprised to see how valuable the outcome of our work has become — sometimes being surprised to find “this, too, is part of the whole result of my business.”
Unfortunately, businesses have been promised neat, tidy, linear routes to success by thousands (tens of thousands?) of business writers and their books. We are told all value in business can be laid down in formulas or the steps to success are simply put forth in seven habits, 10 steps, four quadrants, conjoined triangles, or even absurdities like 62 steps one writer tells us guarantee successful innovation.
All businesses face a fundamental challenge: success only arrives when we are careful to create only the structures needed for success rather than the ones taught in business school to be “best practices.” We must not adopt structures or rules or approaches because consultants tell you “this is the way you should manage your business” or, worse, “this is how the most successful businesses organize.” There are no universals for the big questions in business.
To engage with complexity — to succeed — a business must stop demanding simplistic answers. Instead, executives and key employees must engage the whole of our intelligence, emotions, and instincts to tap the far greater value which comes from a mix of management science, our unique situation, and a thorough understanding of the complex and the unexpected.
Mintzberg and some Strategy “Shoulds”
Science seeks universal truths and laws. By claiming the title “science” for itself, management science has sought to do the same. Yet following universals is not enough to create business success
In the 1970s, Canadian academic Henry Mintzberg led studies into observed strategic decisions and action at Volkswagen from 1948 through 1973 and in US involvement in Vietnam from 1951 to 1973. His team observed and catalogued actions then inferred periods with similar strategy as well as periods of change then analyzed those periods to come to understand how these organizations had proceeded strategically. They also searched corporate and policy documents to help make these categorizations more informed.
I particularly enjoy an observation Mintzberg gives us around developing strategy.
…[S]trategy formation can fruitfully be viewed as the interplay between a dynamic environment and bureaucratic momentum, with leadership mediating between the two forces…
This is consistent with the dynamic environment which complexity science helps us see as a core part of business. Further, it recognizes the limitations of the force of the bureaucracy — organized by management science — as it executes during change. There is no question bureaucracy must exist yet its strengths are accompanied by quite severe limitations — especially an inability to respond when the environment is constantly changing.
Seeking balance from these two forces, Mintzberg challenges the fundamental idea and nearly religious belief that business success requires clearly articulated strategy.
Planning theory postulates that the strategy-maker “formulates” from on high while the subordinates “implement” lower down. Unfortunately… this neat dichotomy is based on two assumptions which often prove false: that the formulator is fully informed, or at least as well informed as the implementor, and that the environment is sufficiently stable, or at least predictable, to ensure that there will be no need for reformulation during implementation.
Management science’s idea is that strategy should always be articulated in advance. In reality, sometimes the only path to an effective strategy is to pursue business and let the strategy emerge along the way. In fact, Volkswagen, over time, exhibited a pattern of variations in strategy. Some strategy was deliberate — established in advance and successful. Some was established in advance and abandoned when it didn’t work. Some strategy emerged as they did business. Their continued success and longevity came through the combination of these periods. Quite often a period which management consultants would criticize for lacking strategic focus was the breeding ground needed to build the basis for a strong, articulated strategy in the future. Mintzberg particularly points to the late 1960s as a time of confused strategy at Volkswagen which was also the period during which Audi came into being — an existence which formed the basis of their highly successful strategy in the 1970s.
Some strategies are most effective left unarticulated. These are ones which lead a bureaucracy to run amok and wreak damage. Consider his discussion of US Policy in Vietnam.
To overstate the bureaucracy’s position, it says to its top management: “Our business is running the operations; your’s is formulating the strategy. But we need a clearly defined, intended strategy to do our job — to buy our machines, hire our workers, standardize our procedures. So please give us such a strategy — any strategy — so long as it is precise and stable [and lets us grow].” The danger in this innocent statement, of course, is that the bureaucracy runs like an elephant. The strategy that gets it moving may be no more consequential than a mouse, but once underway there is no stopping it. As Halberstam notes about Kennedy in 1963 and Johnson after 1965: ” . . . the capacity to control a policy involving the military is greatest before the policy is initiated, but once started, no matter how small the initial step, a policy has a life and a thrust of its own, it is an organic thing” [11, p. 209]. Bureaucratic momentum takes over, happy to have a clear strategy, never stopping to question it. The strategy-maker may awake one day-as did Lyndon Johnson in 1968-to find that his intended strategy has somehow been implemented beyond his wildest intentions. It has been overrealized. Thus, “make your strategy explicit” may be a popular prescription of the management consultant, but in the light of this research it can sometimes be seen to constitute questionable advice indeed. (Emphasis added.)
Measurement Mouse and the Big Data Elephant: There’s No Stopping It.
There are many, many examples (including the Vietnam war) where a strategic mouse leads the bureaucratic elephant to wreak destruction in business and in society.
One of the most common, one which also affected US involvement in Vietnam, is the idea that it is good to measure things. This benign idea turned out to be not so benign. Once the bureaucracies of business were thoroughly computerized, the idea of measuring mutated into the idea that “everything must be measured.”
Thus, today we have vast bureaucracies dedicated to collecting the data of everything. If a bureaucrat can create a desire for something to be measured, software can be used to gather the data. Alongside this bureaucracy collecting data we have another dedicated to analyzing all the data which exists. If data doesn’t exist, then the mere existence of data analytics leads companies to enter periods of more and more aggressive collecting of data. Ironically, Terry Gilliam anticipated this in the 1980s in the film Brazil focused around the Ministry of Information — even suggesting that better careers may be had in the Department of Information Retrieval than elsewhere.
What does business receive back from all this? On average not much (with exceptions). Many companies have dedicated vast resources to creating data lakes or farms and to the analysis of these lakes or farms without finding that they make a significant difference to their business. Many companies attempt to manage every employee according to achieving measured results — an effort which results only in a sum of the parts. It is so severe that fortunately there are companies which have started trying to rein in the “overrealized” data culture so that it focuses on that which matters to success.
I wish this last group well. When the mouse squeaks and the elephant rampages, the whole result becomes far less than a sum of the parts.
Complexity Challenges the Prescriptions of Management Science
Let me offer Henry Mintzberg a final word:
In general, the contemporary prescriptions and normative techniques of analysis and planning and the debate that accompanies them-seem unable to address the complex reality of strategy formation. To tell management to state its goals precisely, assess its strengths and weaknesses, plan systematically on schedule, and make the resulting strategies explicit are at best overly general guide-lines, at worst demonstrably misleading precepts to organizations that face a confusing reality.
We will explore complexity more in future posts. For now, let me merely observe that while management science offers some excellent assistance in achieving success, it is NOT able to drive success on its own. Achieving success requires engaging the unique and unexpected realities around specific companies — realities which reveal the biggest opportunities.
For now, be well.
Quotes are from the paper “Patterns in Strategy Formation” by Henry Mintzberg. Management Science , May, 1978, Vol. 24, No. 9 (May, 1978), pp. 934-948
©2022 Doug Garnett — All Rights Reserved
Through my company, Protonik LLC, I consult with companies as they design and bring to market new and innovative products. I am currently writing a book exploring the value of complexity science for understanding business. Protonik also produces marketing materials including documentaries, websites, and blogs. As an adjunct instructor at Portland State University I teach marketing, consumer behavior, and advertising.
You can read more about these services and my unusual background (math, aerospace, supercomputers, consumer goods & national TV ads) at www.Protonik.net.