Let me ask you a question: “Would you prefer a simple solution to your business problems, or a complex one?”
Obviously ‘simple,’ right?
For long years, we have been told, “Simple is better,” we prefer a neatly rolled up ball of yarn over a tangled pile. In fact, we go to great lengths to ‘keep it simple,’ whether it is in business or in our personal lives.
Simple is easy. Why bother to think otherwise?
The business world, however, is not simple. It is complex. And this complexity is only increasing.
The concept of complexity in today’s business environment extends beyond a mere buzzword. It encapsulates the multifaceted challenges organizations face. This complex web demands understanding and innovative approaches to maintain agility and responsiveness. The critical question for businesses is how to thrive in this interconnected maze without getting lost in its convolutions.
When I say interconnectedness, I am going beyond just the state of the entities in the system, it’s not merely that an organization’s elements are connected to each other and interact with each other, but the speed of these interactions and the emergent adaptive outcomes of those interactions are also increasing. This is how complexity manifests in an organization.
So, if connections are the norm, it leads to the observation that problems within an organization are also interconnected.
Organizational problems are not akin to large monoliths waiting to be carved into a colossus by a team of skilled chiselers and visionary sculptors. They manifest as tiny, interconnected pieces in a jigsaw puzzle. Some of those pieces may relate to finances, while others may relate to product, marketing, supply chains, data management… the list goes on.
As a business leader, it would be wise to see these problems as connected nodes in a network of problems – the problem space. Looking at a problem from this perspective introduces another crucial aspect of organizational complexity: problems are chaotic, and dealing with them requires a paradigm change.
I recently spoke to a business leader from a Fortune 500 CPG company, who shared that despite his team’s best efforts, they could not accurately forecast inventory with their existing models. We quickly learned that what was believed to be a model issue was part of a more complex problem. Since inventory levels fluctuated greatly, the CPG’s sales team encouraged their national account customers to purchase more to mitigate risk and get more value. However, this led to greater discounts, more backorders, delays for smaller customers and stressed production processes. Additionally, we uncovered that marketing promotions were not synced with supply, creating even more demand pressures. Through our exploration and mapping of the problem space, we properly described the complexity of the true problem, one no inventory forecasting model alone would solve.
Businesses are constantly getting signals to change and become anti-fragile. But today’s businesses are resilient at best, some even vulnerable, primarily because they have a siloed approach to problem solving, like we saw in that little anecdote above. Problems are rarely large monoliths, they usually manifest as tiny, interconnected nodes in a complex network. Therefore, it becomes vital for organizations to embrace complexity as they innovate.
In fact, over half of the Fortune 500 companies since 2000 have either gone bankrupt or ceased to exist due to the various shocks that have affected businesses over those two decades.
COVID-19 and the emergence of artificial intelligence are only the most recent shocks that business world has had to adapt to, and many companies are scampering to hire the best minds to make sure that they are not in want of expertise to help them overcome these shocks. But are experts enough?
Michael J Maubussin, the current Head of Consilient Research at Counterpoint Global, an arm of Morgan Stanley Investment Management, once told the Harvard Business Review that we always lean on experts “although it’s been well documented that expert predictions are quite poor.”
“But they’re authoritative, so we listen to them, even when we know that these people are predicting something that’s fundamentally hard to predict,” he said.
In an era of rapid technological advancements and globalization, business challenges are hard to predict. They are navigating the ever-growing complexity of the modern world. This complexity, fueled by connectivity, has forced organizations to transform how they operate, compelling them to adopt new strategies for success.
Connectivity: A Catalyst for Complexity
While connectivity has unlocked doors to vast information and global networks. It has delivered a slew of advantages, such as broader access to markets and knowledge. But it has also escalated the level of complexity and introduced new risks and challenges, making decision-making more daunting due to the unpredictable nature of these extensive networks. The double-edged sword of connectivity necessitates a balance between leveraging its benefits and managing its complexities.
In response to this complexity, traditional linear problem-solving methods are proving inadequate. The need of the hour is a change in basic assumptions towards non-linear and dynamic problem-solving approaches. These methods embrace the uncertainties and fluidities of the modern business environment, allowing organizations to adapt and evolve continuously.
Fostering a Culture of Curiosity and Experimentation
To effectively navigate through this complexity, cultivating a culture of curiosity and experimentation within organizations is crucial. This approach involves encouraging continuous learning and questioning, fostering an environment where innovation is not just encouraged but is a norm. Reducing the cost per question within an organization leads to a thriving ecosystem where every individual feels empowered to seek answers and challenge the status quo.
Lightening the Burden of Expertise
Transitioning from an expert-driven culture to one that values experimentation is vital in managing complexity. Lowering the cost of experimentation allows for greater flexibility and responsiveness to change. In such a culture, ideas and solutions are continuously tested and refined, reducing the reliance on established experts and instead fostering a more agile and adaptive environment.
Interaction Over Intellectual Property
In today’s interconnected world, the value of interaction property supersedes traditional intellectual property. Organizations that encourage higher levels of interaction internally and externally are better equipped to navigate complexity. This new focus on interaction property requires a shift in mindset – from a traditional emphasis on possessing the knowledge to a more dynamic approach of sharing and collaboration.
The Role of Leadership in Managing Complexity
Leadership plays a pivotal role in steering organizations through complexity. Leaders must be visionaries, capable of seeing beyond the immediate challenges to recognize the opportunities that lie within complexity. They need to be catalysts for change, inspiring their teams to embrace new ways of thinking and operating. The leadership’s commitment to fostering a culture of curiosity, learning, and collaboration is essential in creating an environment where complexity is viewed not as a hurdle but as an opportunity for growth and innovation.
Business leaders must learn to thrive in chaos that stems from complexity. This is not just an option but a necessity. Leaders must become comfortable in a constantly shifting environment, seeing it not as a hindrance but as a catalyst for growth and innovation. This means embracing a state of constant discomfort, where the familiar is replaced by the new and challenging.
Those who immerse themselves in this dynamic daily develop an agility that allows them to anticipate changes, adapt strategies quickly, and lead their organizations through uncertainty. This approach transforms chaos into a workshop for creativity and problem-solving, equipping leaders to guide their teams through complex landscapes with confidence and vision.
The Future of Business in a Complex World
As businesses continue to operate in an increasingly complex world, their success will depend on their ability to adapt and evolve. Embracing complexity, cultivating a culture of curiosity and experimentation, and focusing on interaction over intellectual property are key strategies defining tomorrow’s leaders. The challenge for modern organizations is to navigate this complexity not just to survive but to thrive and innovate.
The question arises: How can organizations adapt to and proactively shape and harness this complexity to drive innovation and growth in a world where complexity is the new normal? And are today’s organizations brave enough to make the radical decision to embrace a more disorganized network structure to tackle complexity?
About the Authors:
Richa Gupta is a Business Unit Head at Mu Sigma, who helps companies in high-tech, energy and travel achieve a programmatic approach to decision sciences. Todd Wandtke is Head of Marketing and Customer Success at Mu Sigma.
