[Paleopsych] Complexity theory applied to business, future energy

[Steve]

http://www.cio.com/archive/enterprise/041598_qanda.html

A juicy phrase (skh)  "when autonomous agents interact and mutually affect 
one another, patterns will emerge"

EXECUTIVES WHOSE BUSINESS SCHOOL CURRICULUM failed to include old episodes 
of Mutual of Omaha's Wild Kingdom may gain a new appreciation for Marlin 
Perkins--as management guru. A growing number of consultants and academics 
are looking at complexity theory, once the domain of the biological and 
physical sciences, to help managers improve the way they lead 
organizations.

What is complexity theory? One way to understand it is to look skyward to 
the avian maneuverings of birds. A lone bird follows simple rules of 
behavior, such as when and what to eat. However, a group of birds flying 
together exhibit complex, unpredictable, creative behaviors that emerge 
naturally from the interactions of individual birds. For example, a flock 
in v-formation is able to fly farther and faster than an individual bird. 
The flock that is formed when autonomous agents--birds--interact is known 
as a complex adaptive system. To fly in a flock, a bird need follow only 
three simple rules: Don't bump into anything, keep up and stay in close 
proximity. Yet following these rules leads to a cohesive, seemingly 
complicated group of birds flying with the speed and precision of the Blue 
Angels.

Complexity theorists argue that managers should allow creativity and 
efficiency to emerge naturally within organizations rather than imposing 
their own solutions on their employees. They can do this by setting some 
basic ground rules and then encouraging interactions or relationships among 
their employees so that solutions emerge from the bottom up. Managers can't 
predict what the solutions will be. But just as a flock of birds can 
achieve more than a bird flying solo, it's likely that the energy and 
enthusiasm that are unleashed when employees are working together will 
yield successful results.

Several researchers and companies are examining how an understanding of 
complexity theory can apply to businesses. Roger Lewin and Birute Regine 
are two researchers making headway in this area. Lewin and Regine have 
backgrounds in biology and psychology, respectively, and Lewin has written 
several science books, including Complexity: Life on the Edge of Chaos 
(Collier, 1994). They are currently collaborating on a book about 
complexity theory called The Soul at Work: Complexity Theory and Business, 
As If People Matter (to be published in January 1999 by Simon & Schuster). 
"With the Internet and networks, the extent of business ecosystems is 
growing," says Lewin. "And the pace at which the landscape within an 
ecosystem changes--thereby forcing changes throughout--is increasing." 
That's why Lewin and Regine believe today's business climate is 
particularly ripe for the application of complexity theory.

Recently, Features Editor Megan Santosus spent an afternoon discussing 
complexity theory and its implications with Lewin and Regine at their 
Cambridge, Mass., office.

CIO: How do you define complexity theory for business people?

Lewin: There is no simple definition of complexity theory. Traditionally, 
business people think about their worlds in a very mechanistic, linear way 
that is [characterized] by simple cause and effect and is predictable. Most 
of the world isn't like that. Complexity theory looks at these systems in 
ways that are organic, nonlinear and holistic.

CIO: What are the principles of complexity theory?

Lewin: A few simple rules guide the interaction between the components of a 
system. First, in a business context, managers should attend to 
relationships at all levels within their organizations. The second rule is 
that small changes can have large effects. And third, interesting and 
unpredictable properties can be expected to emerge from a system. As a 
result, it is hard, if not impossible, to implement a strategic plan for 
anything but the short term. A hoped-for direction can be set but not the 
ultimate goal.

Regine: People often think of complexity theory as a metaphor. We certainly 
don't think of it like that because that is like saying it's just another 
fad. What we're saying is that underlying principles found in nature apply 
to human organizations.

CIO: So how does this organic way of looking at things apply to businesses 
and other organizations?

Regine: It gives them a different way of looking at their organizations. 
Take the property of emergence, for instance. In computer models based on 
complexity theory, when autonomous agents interact and mutually affect one 
another, patterns will emerge--an intrinsic order just waiting to unfold. 
But it comes about in a nonlinear way, so the order can't be predicted. 
When we translate computer models into human terms, the autonomous agents 
are people and the interactions among them are relationships. Complexity 
theory underscores the importance of relationships. How people relate to 
one another affects what emerges in the organization--the culture, the 
creativity, the productivity.

So if you want a culture that is intrinsically creative, growing and 
learning, you have to look at the relational level: Can people be real with 
one another? Is there trust? Do people acknowledge each other and the good 
work they do? In organizations that have relationships as their bottom 
line, a culture of care and connection emerges--and it is palpable. In this 
context, people are more willing to change and are more adaptable because 
they feel they're not alone and that together they can manage most 
anything.

CIO: It sounds like complexity theory flies in the face of traditional 
problem-solving techniques.

Lewin: The idea of teamwork has been popular, for instance, partly because 
managers believe that people are happier as members of teams but also 
because teams can be highly effective in the workplace. The traditional 
approach to [implementing a team structure] would be for managers to say, 
"OK, we're going to make you a team," and to expect everyone to fall in 
with the idea. This can work, but from what we hear, it often doesn't work 
very well because it is imposed and artificial. When managers genuinely 
value relationships in the workplace and truly listen to people and act on 
their suggestions, a culture of care and connection emerges in which people 
are highly responsive to the needs of the organization. Teams can form 
spontaneously and powerfully in this context, and the job gets done. It's 
much more effective to allow solutions to problems to emerge from the 
people close to the problem rather than to impose them from higher up.

CIO: Do you know of any organizations that have used complexity theory to 
solve problems?

Regine: At Muhlenberg Regional Medical Center in Plainfield, N.J., it took 
up to 24 hours to admit patients and give them their first dose of 
antibiotics. [The hospital] used a complexity approach--[implementing] 
small changes and bottom-up solutions, then allowing things to unfold--to 
solve the problem. The vice president of nursing put together a diverse 
team of people--secretaries, doctors, administrators--to try different 
things, to experiment, to make small changes and see how they could reduce 
the wait. First they tried having all the admissions procedures done in one 
place. Then they looked at duplication of services. One thing led to 
another, and within only four or five months they had reduced the admission 
time to one hour. No one could have anticipated that the new way of doing 
admissions would have emerged so quickly and so efficiently.

CIO: How does complexity theory apply to strategic planning?

Regine: Everybody knows that in most industries long-term strategic 
planning is near impossible, and this is often viewed as a failure on the 
part of management. When you recognize that the business environment is a 
complex system that is inherently unpredictable, you understand that the 
failure of long-term strategic planning is not a failure of management but 
an expected outcome of the business environment. The challenge for managers 
is to feel comfortable merely setting the direction for the future and to 
be ready to adapt and evolve as the environment changes.

The Industrial Society, a London-based business consultancy, was on the 
brink of financial collapse three years ago. A new CEO was brought in, and 
he said, "Forget about a strategic plan. The first things to get right are 
the relationships among top management." He then asked the workers in the 
lower levels of the organization what they thought they could achieve in 
their wildest dreams. Some responded with wildly unrealistic profit 
targets--and many were met. The energy tapped was incredible because a 
project was available for anyone who wanted to participate [on a team], 
whether it was a secretary or top manager. The company is now financially 
healthy.

CIO: Traditional consultants who are in the business of providing solutions 
may find themselves at odds with complexity theory.

Regine: Many consultants often get in the way of emerging solutions because 
of their need to prove they have answers. There is a role for consultants, 
but it's a very different kind of role and leadership.

CIO: How should the role of consultants change?

Lewin: Of course, corporations will always need consultants to go in and 
fix many operational problems, such as line scheduling. But when you are 
dealing with organizational issues, particularly those that require change, 
it's appropriate to consult in a different way. A complexity theory 
perspective is particularly helpful to disheartened, disconnected companies 
where workers lack commitment--rather, they just watch the clock and work 
to pick up a pay check. For instance, a big steel-making company in 
Australia was having terrible industrial relations problems, with workers 
and managers battling each other. Not surprisingly, productivity was way 
below its potential. Consultants went in and simply got people talking to 
each other. Before very long, these big, muscular Aussies were building 
relationships with each other. Workers and management began to empathize 
with each other's problems. And productivity went up 20 percent. The 
consultants didn't have a strategic plan to increase productivity by a 
certain amount. They attended to relationships, as the complexity approach 
says, and the productivity enhancement followed.

CIO: Wouldn't the role of executives have to change as well?

Regine: CEOs and CIOs are used to thinking that they have to have all the 
answers, that they are in control of everything. Well, control is not 
something you can have over a complex system, at least beyond some very 
general parameters. So yes, executives do have to change. They have to give 
up the illusion of control and concentrate instead on setting a larger 
vision for their organizations so that the creativity of their people can 
emerge.

Lewin: It's not about saying let's look at business organizations as if 
they are complex systems. They are complex systems. Managers have been 
operating within them in a very controlling way, which dampens the 
potential creativity of employees. What we're saying is shift the way you 
[lead] organizations, loosen control to encourage more creativity. A 
culture of care will emerge, as opposed to a culture of command and 
control, and your company will be more creative and productive, too.

CIO: What are the qualities executives need in order to be successful in a 
complexity environment?

Regine: Be accessible, respond immediately to others, acknowledge and value 
people's contributions at all levels, create opportunities for people, take 
the time to build trusting relationships and walk the talk--you are the 
embodiment of the organization's values. If you can't be honest, then how 
can you expect others to be? [Wouldn't dishonesty] affect the culture, the 
organizational identity and how you develop relationships with other 
organizations? It all starts with you.

CIO: Are there any qualities employees need to have in a complexity 
environment?

Regine: The people on the front lines have to conquer the fear of freedom 
that comes when they are given the leeway to do something important.

CIO: What about organizations? Are there particular qualities that 
characterize a complex adaptive system?

Regine: There's a tendency in business to focus at the macro level. One 
thing complexity theory says is that the most powerful processes happen at 
the micro level--the people, relationship dimension. [To initiate these 
processes,] start small, experiment, include others and promote a "just try 
it" environment. Set up a few simple rules, then let go. Small successes 
will [encourage] other people to start pilot projects, and a comfort with 
change will catch on.

Complex adaptive systems have three ways of functioning. There is the 
stable zone, in which the company is in a state of inertia, not responding 
to opportunities nor adapting to changes. However, stability is not 
something to strive for because it leads to an unresponsive system. Then 
there is the chaotic zone, in which the organization is bouncing off the 
walls, haphazard, led by events rather than choices and overreacting. And 
there is a zone in between these two, the creative zone, which is the place 
to be--not so stable that [little] changes, nor so unstable that everything 
falls apart. There's a lot of fluctuation in the creative zone--ups and 
downs and paradoxes keep occurring. For example, leaders in complex 
adaptive systems need to be strong and have vision, yet they also need to 
be comfortable managing with a hands-off approach. Also, companies may know 
the direction in which they're moving, but they don't know exactly where 
they will end up. Creativity emerges from tolerating such ambiguity.

Features Editor Megan Santosus can be reached at santosus at cio.com 
<mailto:santosus at cio.com>.