The challenges of complexity

By Elizabeth Rudd, Director, FutureNous
Wednesday, 19 June, 2013

As business cycles get crunched and we’re more connected with our stakeholders, businesses need to adapt to a world where decisions can have far-reaching and unexpected effects.

Do you ever feel as though everything happens much faster today? The pace of change seems relentless, everything is more complex, with more stakeholders for every decision. While there is much debate about the actual rate of change (is it faster now or at other points in history) there is broad consensus the world has become more complex and interconnected.

A definition of a complex system is one with many interdependencies. (As this is a technology magazine, it’s worth clarifying, the word systems is used in its broader sense encompassing more than technology.) Society has used technology as an enabler to create a complex web of interdependent and interconnected relationships. However, complex systems reach a point where too many interdependencies create instability.

William Davidow, veteran of Silicon Valley and engineer by training, refers to this as “overconnectedness” in his recent book of the same name. When a system reaches the point of overconnectedness it becomes unpredictable, prone to accidents and contagion, and situations can rapidly escalate to extremes. Research by British cyberneticist W Ross Ashby concludes large complex dynamic systems appear to be stable until they reach a point of “connectance”; exceed this point and the system suddenly becomes unstable. Unfortunately, exceeding this point is not readily apparent and instability can happen very quickly.

Referring to organisations as “too big to fail” is a simplification of these concepts and illustrates the risks to the overall system when it becomes too complex. The more interconnected the system, the harder full visibility of the system becomes, making the risks more difficult to identify or quantify. Instability and unpredictability in the system are harder to assess and mitigate or avoid. Unintended consequences happen more frequently, faster and with greater impact.

One example is the impact of US mortgage debt on the entire global financial system. Through a complex web of interdependencies, risk from mortgage debt was spread globally throughout the world’s financial system, with little overall visibility of the level of risk and volume of transactions in the system. When problems arose the contagion spread very quickly. Unfortunately, this is not an isolated example; the Arab Spring, the Asian currency crisis, the bubble are also examples.

The increasing level of interconnectedness points to more instability in the future not less. How can you better prepare your organisation? Understanding systems dynamics is a useful starting place. Understanding how systems vary in terms of maturity, stability, and the impact positive feedback loops can have on instability is helpful.

Systems dynamics can be a powerful tool to identify leverage points, warning indicators and external vulnerabilities. It is useful in understanding industry growth and decline, organisational performance and maturity. Critically examining and mapping your organisation’s internal and external systems can identify opportunities to build resilience or implement redundancy measures, leaving you better prepared when external shocks occur. This is true for IT and the entire business. While not slowing the pace of change, better understanding complexity can help to mitigate the impacts.

Image credit © Rich

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