Harnessing complexity
by Peter Allen Professor of Evolutionary Complex Systems
In the rapidly changing world of global markets, e-commerce and the internet, the secrets
of Complex System evolution provide a basis on which to reflect on the management of
our businesses. Insights gained from Complex Systems thinking suggest freedom and
creativity count for more than cost reduction and efficiency, as these provide the
foundations for learning and change.
Today, businesses and organisations must deal with the production and delivery of
increasingly complex products and services in a rapidly changing and uncertain
environment. This raises questions concerning the effectiveness of traditional
management methods - focused on efficiency and strategic planning and control - in
generating successful companies capable of flourishing in this new environment. The
need to adapt, change and be creative is crucial today, and it is therefore vital to
understand how companies can achieve this. Survival, in this brave new world, requires
that we learn how to bring about self-transformation, adaptation and change in ourselves
and in our organisations, as this is where we can harness the insights that have come from
recent research into the behaviour of Complex Systems.
What is a Complex System?
A Complex System is a system that has more than one possible future. In other words, it
is ‘free’ enough to take more than a single pre-determined path into the future, and
therefore cannot be purely ‘mechanical’. Clearly, we are all complex systems by this
definition, and so are the organisations, communities, economic sectors, regional
economies, ecologies and global systems to which we belong and interact with. Indeed,
mechanical systems really only exist as abstractions in our minds, and the systems we
inhabit and try to manage are not mechanical. Yet all our science and our way of thinking
about problems is based on the assumption that a company or organisation comprises a
set of functional components with connecting flows of goods and information. In this
view, better management is often seen as simply running the ‘machine’ faster or
more efficiently.
But that was when life was simple and the ‘product’ or ‘service’ to be produced and
delivered only needed to be made at a competitive cost with adequate quality. Today, we
must constantly create new products and services, with additional and novel attributes,
and this creative, adaptive capacity will be more important to our survival than our level
of efficiency, particularly if, as Complex Systems thinking suggests, efficiency reduces
creativity.
Traditionally, decision making and strategy have been based on a rational set of
assumptions such as:

we know our options

we know and can evaluate the (single) outcome of implementing each of them

we can ignore effects that we do not know

the environment in the future ‘after’ the decision is known

there was a situation ‘before’ our decision, and that there will be a situation ‘after’ our
decision, and that we can therefore examine the differences between them.
Such reflections are typical of a cost/benefit analysis, for example, by which the
outcomes of different possible decisions are compared. Yet, in a world of rapid change
and uncertainty, the assumptions relied upon by this kind of ‘reasonable’ behaviour are
simply not true. In reality we do not necessarily know all our options, the path the system
may take, the possible dimensions that might be affected by resulting changes, or how
circumstances may have changed in the mean time. In short, our view of our organisation
as a machine, sitting in a fixed or at any rate predictable environment, is totally
inadequate. We must instead turn to new ideas - we must harness the ideas arising from
Complex Systems.
Complex Systems behaviour
In studying Complex Systems, initially in physics and chemistry, it became clear that the
key properties of ‘open’ systems, where flows of matter, energy and information can
occur across their boundaries, were that they could undergo spontaneous transformations
of structure and functionality (See Box 1). Instead of a ‘fixed’ mechanical system, this
showed how systems came into being, and evolved over time, changing structurally,
gaining, and sometimes shedding, complexity and qualities.
The study of Complex Systems therefore revealed a co-evolutionary process of a system
and its environment in which successive change and adaptation each involved two
separate steps:

discovering what to do (exploration and evaluation)

doing what has been decided (implementation).
And these two steps are radically different in nature.
In Complex Systems, the first step is ‘taken’ by the ‘non-average’ underlying elements
within the system, while the second – the emergence of a transformed, functioning
system - concerns new, effective ‘average’ behaviour of the elements. The successful coevolution of a system with its environment therefore occurs through the dynamic
interplay of the average and non-average behaviours within it. Successive instabilities
occur each time that existing structure and organisation fail to withstand the impact of
some new circumstance or behaviour. When this occurs, the system re-structures and
becomes a different system, subjected in its turn to the disturbances from its own nonaverage individuals and situations. It is this dialogue between successive ‘systems’ and
their own inner ‘richness’ that provides the capacity for continuous adaptation and
change.
Lessons for business
Clearly, these two steps will seem obvious to anyone running a business - firstly, we
work out what product or service we think will succeed, and then organise a system to
produce and deliver it as efficiently as possible. In a world of slowly changing markets
and fixed technologies, this could be undertaken once, or very infrequently, and the
system optimised. However, in our world of fast-changing markets, competitors and
technologies, there is a constant need to keep revising and up-dating knowledge and
information about possible markets, customer needs and technical possibilities.
Step 1 requires that we explore the possibilities in order to discover possible options and
decide from them what to do. We need to be good at ‘going beyond’ present knowledge
and wandering into undiscovered territory. But, in order to perform step 2 successfully,
we need to execute what has been decided as efficiently and fast as possible, avoiding
any unnecessary waste. This requires rational analysis to obtain mechanical and
economic optimisation.
The qualities required for Step 1 are the freedom and ability to move into uncharted
territory and have new thoughts, while those required for Step 2 are the ability to make
and act upon rational analyses of the processes and costs of the system Ð but these are
opposite qualities. And, not only that, pressure for greater measurable accountability,
short term share-holder value and the increasing use of IT makes it increasingly more
difficult to protect the presence of the qualities required for Step 1 against the simpler,
more easily measured qualities for Step 2. Yet without Step 1 there can be no Step 2!
Imagination and creativity must precede efficiency of execution. Complex Systems
models and simulations demonstrate the truth of this statement, showing the role of
individual diversity in Step 1 creativity and exploring the circumstances which may
require more or less focus on Step 1 or Step 2 qualities.
Aerospace Design Process
A current piece of research concerns the way in which new knowledge and technology is
explored in creating a very complex product such as a new aeroplane. Part of the
technology budget is specifically allocated to a free exploration of ideas by young
technologists in the group. There are prizes for success and bidding rounds for further
support. They are allowed to talk freely to suppliers if this is important. Precise, detailed
accountability is not applied to this exercise, but instead the judgement of the Head of
Technology is confirmed through the overall long-term capacity of the section to deliver
new technology when required. This company has a long and successful history in this
highly competitive and innovative sector.
The Prato District Network in Italy
Just 15 km from Florence, the small Prato District encompasses one of the largest
concentrations of textile manufacturing in Europe. There are over 8,000 companies,
employing 44,000 people, with production of $4.5 billion. Activity here dates back 1,000
years and this long evolution has led to this adaptable social network, founded on longterm social relationships, that allows them to respond more rapidly than competitors to
the uncertain and changing fashion market. (Current PhD Thesis by Jane Gillies)
Complex Systems thinking provides a framework that can inform every aspect of
business management, linking research, development, concept and design with
imaginative market exploration, human resources management, and overall business
strategy and identity. It concerns the complete ‘knowledge dynamics’ that drives the
company - right through the creation, evaluation, selection, implementation and
discarding of knowledge. It demonstrates that this is the power behind the
competitiveness of new growth companies and indicates how it can be adopted by
businesses and by whole business networks.
Ultimately, the creativity and imagination of a business will come from the dynamic
interaction of diverse individuals. These individuals that create new ideas and value may
be within one company, but often will span several within the network, giving rise to
winning clusters of activity, capable of evolving faster than their rivals.
Complex Systems thinking also informs us how to achieve a high rate of delivery of new
products and services and rapid adaptation to changing conditions. Instead of designing
and planning products and services as a ‘top-down’ exercise through a captive ‘supply
chain’, the models of self-organising networks provide an alternative view. Here,
products emerge as the result of a changing pattern of collaboration of a network of
suppliers, both competing and co-operating, each expert in its own domain. The network
is characterised by long-term relationships between nodes, but does not always require
the same partners to be involved all the time. Different nodes can rapidly come together
or separate for the production and delivery of different things.
In the rapidly changing world of global markets, e-commerce, evolving telecommunications and internet, the secrets of Complex System evolution offer us a basis
on which to reflect on the management of our businesses.
They tell us not to allow optimisation on any single criteria (eg. cost minimisation) and to
provide freedom and resources to those parts of the business that must be creative, while
regulating closely those parts that are purely bureaucratic. Making sure that designs and
decisions are always debated among a diverse group of individuals, and that different
perspectives are discussed and examined, we need to encourage people to express their
individual views and differences and to have enough self-confidence to question their
present activity and knowledge. Allowing exploration and experiment means tolerating
‘failure’ and being open to new ideas requires an atmosphere of confidence and trust,
which in turn requires a long-term social relationship. The insights coming from
Complex Systems thinking tell us that such things matter more than cost reduction and
efficiency, as they provide the basis for a sustainable adaptive capacity for learning and
change.