Last time we discussed complexity in organizations and how embracing complexity can lead to a competitive advantage. However, not all complexity is the same. Take Uber, the ride-hailing service, for example. Globally, they are continuously facing new regulations challenging their business model, face very different requirements from their stakeholders whether they are investors or drivers, and have to innovate continuously to avoid being outperformed by new entrants or existing competitors such as Lyft or Grab. This shows complexity has different dimensions. Some aspects simply cannot be described on a single piece of paper, while others have too many moving parts to keep up with, or need to function in a space where there are no or unclear rules.
So how do these dimensions fit in your organization?
If we focus on business operations, including strategies, processes, policies, product and service structures, regulations and so forth, three dimensions of complexity stand out:
- Dynamic complexity describes matters in every aspect. When a subject requires extensive explanation, it is complex in terms of depth. When a subject has different dimensions, it is complexity in terms of breadth. Moreover, the rules change continuously, which makes it hard to keep up with reality. Just imagine playing a challenging board game in which the rules change while playing. You would have to get a grasp first.
- Social complexity happens when there are many interactions with a fast-changing environment. For instance, business operations usually involve multiple stakeholders, each having different and sometimes conflicting requirements. We often experience difficulty dealing with all these different requirements.
- Emerging complexity is characterized by disruptive change and the uncertainty that these disruptions create. New entrants and existing competitors which are able to deal with the risk of uncertainty can outperform organizations that cannot. We have seen it countless times with disruptive companies such as eBay, Amazon, Airbnb or WeWork.
“Most trends in business operations affect the dimensions of complexity directly”
Why today’s best practices no longer work
Today’s business jargon is dominated by terms such as co-creation, mass customization, value networks, smart sourcing, collaboration, connectivity, continuous transformation, uncertainty management, and so forth. They are all consequences of a more fundamental shift that has taken place, from a manufacturing perspective that was dominated by transactions, to service, information and combination economy based on interactions.
It seems that most trends in business operations affect the dimensions of complexity directly. Unfortunately, the way we structure our organizations, the controls we have put in place, the best practices we use, and the processes we have designed often do not reflect that new reality. In most cases, these solutions are more like band-aids, which require additional purchases in the long term. In other words, the foundation is once again complicatedness.
What is up next?
Next week we will start diving deeper into the three types of complexity starting off with dynamic complexity. We will talk about the effects of dynamic complexity and some relatable examples. Interested in reading our next blog? Stay tuned by signing up below or follow us on LinkedIn, Twitter and Facebook to stay in the loop at all times. In the meantime, have a look at our website on how Be Informed can help you with turning complexity into value.