Mastering Complexity: Part 1: What Complexity Is

Today’s global business environment is increasingly dominated by “Complexity” and its effects.

Complexity” and “Complex” are often used interchangeably with complicated, but when we use these terms, we are specifically referring to a non-linear spectrum, rich in meaning, that runs from simple at one end, through complicated, to Complex at the other.

The distinctions between points on this nonlinear spectrum – especially the non-linear break between complicated and Complex – are absolutely crucial in:

  1. Understanding what’s happening in today’s world, and why (this article).
  2. Understanding why accepted wisdom isn’t working in addressing it (Part 2).
  3. Knowing what to do differently, why and how (Part 3).

In Part 2, we’ll explore the detailed differences between simple, complicated and complex (especially the latter two), and defining each helps understand how it differs from the others.

However, we’ll start in 1. by explaining in detail what we mean by “complex” and how it applies to the business world.  This will then be our reference point for Part 2 and Part 3, and we will approach it by describing:

  1. The components or elements of Complexity.
  2. The behaviours and attributes of Complexity.
  3. The implications that follow.

All the way through, whilst mostly talking in general terms, we’ll relate back to organisations and business, and we’ll finish this section by (4) summing-up in the context of today’s particularly Complex business environment.

1. The Components or Elements of Complexity

Complexity as an abstract concept – and the spectrum of simple, complicated and complex – can be applied to describe and understand many things.  

However, as we will see, the most important applications for our purposes are in using the spectrum to describe systems, the types of challenges that systems exist (and seek) to respond to – both problems and opportunities – and the approaches that are utilised (by “systems”) to address them.

Therefore, rather than examining the general components or elements of complexity in purely abstract terms, we’ll instead “ground” and explain them by looking at systems, and what makes a system complex.

After all, challenges and approaches to dealing with them are in many ways systems, too, also comprising – to use a dictionary definition of system – “…a regularly interacting or interdependent group of items…” (where items could be physical – including People – and/or concepts, factors and ideas).

To begin with, to be recognised as a system at all, a Complex system – as with any system – must firstly have a definable purpose and “do” something to fulfil it, from which its structure and its traits then flow (in other words, it is “about” something – just as with a challenge or an approach to a challenge – and this is what separates it from chaos).

Purpose and “function” are defined in relation to, and with reference to, the external context or – for a system – its external environment and the challenges that this environment poses.  To elaborate:

  • An organisation exists in part to realise internal Value for itself and its stakeholders, yes, but mostly to facilitate Value for its external customers, who want a problem or problems solved.
  • A challenge relates “to” or affects an organisation in pursuing what its customers find valuable.
  • An approach to dealing with a challenge relates “to” that challenge.

The combination of purpose and resulting structure and traits make the system recognisably and uniquely what it is and define its boundaries.

With a complex system, this can all be shown in general terms as a pyramid, where each “level” flows from (and is influenced by) the “level” above (and where feedback ideally also flows back “up”), and where change is typically “slow” at the “top” and “fast” at the “bottom”:

(Similarly, Complex challenges – to be both “complex” and “challenging” – relate to, or are comprised of, multiple “levels” and therefore require a commensurately nuanced response.)

For organisations, this can also all be represented as the Organisational Productivity Framework (OPF):

Whilst, with Complexity especially, boundaries may not always be easily defined – they shift, and overlap – both these visual representations illustrate the key point that there is a persistent, recognisable and defining shape and scope which is sufficiently distinct to describe and recognise it, and to differentiate it from its external environment and other systems, challenges, etc.  

Related, though, what happens at the boundaries is therefore ever more critical, the greater the degree of Complexity.

Secondly, as with any system, a Complex system must also have parts, participants or “agents”, but – to be Complex – at least some must be “active” entities capable of autonomous perception, decisions and actions (which in turn become part of the system), and they must also be many in number and significantly diverse (i.e. the differences must make a difference and not just be superficial).  

Diversity amongst “agents” is often (but not always) a natural byproduct of there being many of them, and the agents themselves may not necessarily define, or even notice, these crucial differences.  

Within an organisation (and in most complex systems) “active agents” are pretty much always People: there are typically many of them, with all kinds of formal and informal, and explicit and implicit, differences between them that make them diverse – some differences are obvious to everyone in the organisation; some are known only to some people; some are only clear to outsiders.

Thirdly, whilst a Complex system may also face simple and complicated challenges, an essential part of its being Complex is that it (and the agents within it) must face Complex challenges, which – typically – also means interacting with other Complex systems (especially organisations) that create, influence and interact with those challenges.

For organisations, this is often summarised as “PESTLE”, where each letter effectively represents a distinct complex system that poses Complex challenges, and involves other (Complex) organisations:

NIP Arrow Mania - Organisational Productivity Framework (1).png

Finally, there needs to be a high level of connectivity in two ways that tend to reinforce each other:

  • “Internally”, i.e. “agents” are not just numerous and diverse, but also linked to one another in numerous and different ways.
  • “Externally” in terms of connections to the Complex external environment. 

These connections and links are not just linear or hierarchical, but also form networks; they can also be strong or weak, with the strength often not an indicator of its significance and potential impact – e.g. a CEO may watch a webinar that leads to implementing an entirely new strategy.

2. The Behaviours and Attributes of Complexity

When these core elements of a Complex system come together – many, diverse and highly-connected agents operating within a recognisable and distinct structure to a defining purpose, all located within a Complex environment that poses Complex challenges (themselves Complex “systems”) – they lead to some key general behaviours and attributes.

The first of these is interactivity between the people within the system, the nature and extent of which is affected and governed by several factors:

  • Proximity, i.e. how near people are to each other, either physically or “emotionally” (e.g. depth of friendship).
  • Activation, i.e. “triggers” internal or external to the system that causes them to interact with each other, such as events or steps in a process.
  • Space, i.e. the physical and conceptual context within which interaction between people happens – an example of the latter might be social class.

There is also interactivity between the system and the external environment, where the system responds to changes in that environment and, if possible, tries to influence that environment to be more favourable to it. 

This two-way exchange is especially true when it comes to “value”.

Value is always defined and experienced by the (external) consumer, such that the system (or organisation) needs to (internally) respond to changes in what is “valuable”.

But organisations also seek to influence what is perceived as valuable through entrepreneurial activity that anticipates and proposes what that is.  Indeed, the term “value proposition” pithily and accurately articulates this latter process.

This interactivity results in the creation, communication and exchange of information and feedback with differing degrees of “richness” according to which “level” it relates to:

This information and feedback then influence and inform active agents in making purposeful choices.

Within organisations, as noted already, these are decisions that serve it creating value.

And so a key dynamic within a “system” is establishing and addressing “information” or “knowledge differences”, such that necessary information that is available elsewhere (or can be created) is identified and communicated swiftly and effectively.

(This is far more difficult at “higher” “levels” and/or when it needs to “travel” and translate between “levels”, e.g. “translating” a high-level mission statement into actionable processes.)

These knowledge-rich interactions and associated choices result in constant, self-reinforcing change:

  • Which People (and types of people) are involved in the system.
  • How, why and when they interact with each other.
  • What defines success and how it’s measured.
  • What strategies are adopted to achieve goals.

And so on:

This “adaptation” in response to information and feedback means that a complex system is never static, giving us the widely-recognised term “complex adaptive system”.

And what sets this change apart from change in other kinds of systems is that it is “emergent”, by which we mean two things:

  1. It is self-organised: adaptation largely “emerges” separately and distinctly from being “led” in the traditional sense, or coordinated from a “centre”. 
  2. It is typically “creative”: what results from an adaptation is often greater than the sum of the system’s parts, such that it can’t be fully foreseen and such that something new “emerges”. 

As we shall see in Part 3, properly harnessed, this is true “innovation” – not the empty calls for “innovation” so often presented as The Answer – and it comes for “free” with Complexity.

3. The Implications That Follow

All of the above elements and behaviours need to be in place for a system to be Complex and, if they are, the first thing to see is that Complex systems are inherently unpredictable.

Firstly, they are subject to, and affected by, both known and unknown internal and external factors, over which there is varying (perceived) control: some things can be known, and some things can be influenced, but many – even most – can’t.  

For example, with an organisation:

  • Internally, it may be possible to exert considerable influence over employees, but people are ultimately unpredictable.
  • Externally, it may be possible to plan budgets, but financial crashes sometimes “just happen” (or, more accurately, “emerge”).
  • Most importantly – what consumers Value is an emergent phenomenon, beyond an organisation’s control. 

Secondly, due to adaptation and emergence, how Complex systems respond to these factors is also unpredictable, and small discrepancies and changes can magnify into extreme differences and disruption.

(One reason why Complexity literature abounds with references to chaos theory, although it is important to note that emergence is not the same as chaos.)

The distance between cause and effect widens, and their relationship increasingly obscure.

This means that change is continuous and that risk is a constant; in response, it also means that no problem or challenge can ever be fully defined

  • It is impossible to isolate a problem, challenge or opportunity from its context of complexity
  • The challenges within, and affecting, a complex system are always fluid and shifting.
  • Constant change makes it impossible to deconstruct a problem, challenge or opportunity into component parts (which, as we shall see in Part 2, is what underpins familiar ways of working).

In turn, this thirdly means that no problem or challenge can ever be finally resolved, because the conditions that led to it arising will change and never repeat exactly.

Whilst learning is important and transferable to a degree, any “solutions” are therefore imperfect at best and mostly one-off.  

Similarly, with emergence meaning that a system’s whole is greater than the sum of its parts – and its constituent elements and the challenges facing it being in a state of constant flux – the interactions and patterns within the system between agents and elements of the system are more important for understanding it than those agents and elements themselves. 

But the final, and most important, implication of the elements of complexity and how they behave together is this: the larger the system being looked at, the more complexity there is – more “agents”, more connections, more interactivity, more factors involved, more change, more emergence, more unpredictability and more challenges. 

When thinking about organisations and business, this Complexity is also fractal.  Why? Because:

  • An organisation is comprised of People, and People are, themselves, Complex – the brain itself is incredibly Complex, possesses consciousness and the ability to self-reflect (which means comparisons with other natural systems that exhibit complex behaviour, such as ant colonies or flocks of birds, are only partly appropriate) and People are neither consistently “rational” or predictable.
  • An organisation of any size is therefore a “complex adaptive system”, by definition.
  • A relationship between organisations (and most organisations have business relationships) is then a relationship between two “complex adaptive systems” – Complexity squared, as it were, where even simple interactions have a habit of blowing-up.
  • When scaling up to Ecosystems, markets, economies, etc (not to forget that each “PESTLE” factor is a “complex adaptive system”), complexity becomes exponential.

It is at this point that we reach the conditions of today’s business environment, and need to start talking about “complex adaptive ecosystems”.

4. Summing-up in the Context of Today’s Particularly Complex Business Environment 

What we are now seeing is an unprecedented intersection of all that we have established above – applied at the level of the most “complex adaptive ecosystem” of organisations and business challenges imaginable (reflecting that all of reality is, itself, a Complex system) – with the reinforcing and game-changing disruptive impact of information technology. 

And the “combination” matters – after all, there have long been organisations comprised of (Complex) People that interact with each other on a large scale, and there have also long been technological advances – and so it is our twofold contention that going back to first principles of Complexity:

  1. Gives new insight into what is happening, and what to do about it – in particular why existing approaches not only don’t work, but actually make things worse.
  2. Explains why information technology has had a uniquely accelerating and amplifying impact.

We will deal with 1. in more depth in Part 2 and Part 3: it is sufficient for now to note that complexity theory is well established in other disciplines – especially biology and physics – but not business.  

To develop 2., information technology – and, in particular, broadband connectivity, the Internet, cloud computing, the ubiquity of devices and social media – has accelerated all the elements of Complexity:

  • Unprecedented connectivity and interdependence between more (diverse) people and stakeholders: the number of “agents” or people being crucial for Complexity, as we saw earlier.
  • Transformation of the options and capacity for interacting, and reduction – or even elimination – of barriers of proximity, difficulty and cost of doing so: interaction being a key element of Complexity.
  • Automation of mundane tasks, freeing up more capacity for – and expectation of – engagement with expertise- and knowledge-rich tasks for active “agents” (People), which is especially the case with the younger generations.
  • Exponential increase of the speed, amount, availability, transparency and immediacy of information: information being the driver of the choices People make and the actions they take.

Importantly, though, the explosion of information is a double-edged sword, because its sheer amount can be overwhelming – making it harder to discern what is most valuable amongst the “noise”, interpret it and make choices.

All this has, in turn, directly enabled and amplified today’s familiar and interconnected PESTLE “mega”-trends, often misleadingly described as Volatile, Uncertain, Complex, Ambiguous (“VUCA”) – Complexity is the root and driver of the other aspects; not just “another” aspect (we propose “C-UVA” as a more precise and accurate term).

These trends then shape and define the external environment within which organisations are trying to succeed, e.g.: 

  • The changed expectations and priorities of a connected world, e.g. the transformed balance of power between supplier and customer, the erosion of trust in familiar institutions and structures, or the emphasis on softer forms of “value” (authenticity, Corporate Social Responsibility, etc) that make “value” even more subjective than it already inherently was by being something that is perceived by consumers, rather than objectively “created” by organisations (despite the constant talk of “value creation”).
  • Bottom-up development of movements and ideas, rather than top-down control.
  • Previously unimaginable economies of scale.
  • The increasing dominance of services over physical objects, and – even beyond this – the dominance of ideas, intangible assets and experiences over both in creating profits, and the recognition that these are more scalable and valuable than products.
  • The role of Complex social issues as drivers of the global political agenda, and the associated turbulence.
  • The fragmentation of traditional business structures and practices through e.g. specialisation, collaboration and the development of “ecosystems” or “value chains” – such as the open source software movement – instead of transactionally-dominated relationships.

Such trends reinforce each other, and are themselves reinforced by technology, creating a “perfect storm” of extending interdependence, and cascading and reverberating feedback loops that further heighten Complexity and all of its results – change, unpredictability, and so on, and in particular the difficulty of making decisions.

In other words, there has been a seismic shift something akin to the impact of the printing press, but on an exponentially different scale, because the technology-fuelled growth and impacts of Complexity are self-reinforcing: there really is no precedent and the situation can seem overwhelming.

So, What Should We Do?  

Faced with the increasingly Complex challenges of a world operating on the technology-reinforced fundamental principles of a Complex adaptive (eco)system, the answer is to respond in kind – i.e. with Complexity-informed , technology-enabled approaches.

This may sound obvious; it may sound simplistic. 

But whilst, when explained, it may feel “familiar” and even obvious – as with any new paradigm when it is recognised (because it is based on things people already know and recognise, even though they don’t know that they know and recognise them) – it is neither.

And, to illustrate this, we need to next see what catastrophic results occur when Complexity-informed approaches aren’t used, and other approaches used instead: especially “complicated” ones.