Taming Complexity

Martin Reeves , Simon Levin , Thomas Fink and Ania Levina at Harvard Business Review: “….“Complexity” is one of the most frequently used terms in business but also one of the most ambiguous. Even in the sciences it has numerous definitions. For our purposes, we’ll define it as a large number of different elements (such as specific technologies, raw materials, products, people, and organizational units) that have many different connections to one another. Both qualities can be a source of advantage or disadvantage, depending on how they’re managed.

Let’s look at their strengths. To begin with, having many different elements increases the resilience of a system. A company that relies on just a few technologies, products, and processes—or that is staffed with people who have very similar backgrounds and perspectives—doesn’t have many ways to react to unforeseen opportunities and threats. What’s more, the redundancy and duplication that also characterize complex systems typically give them more buffering capacity and fallback options.

Ecosystems with a diversity of elements benefit from adaptability. In biology, genetic diversity is the grist for natural selection, nature’s learning mechanism. In business, as environments shift, sustained performance requires new offerings and capabilities—which can be created by recombining existing elements in fresh ways. For example, the fashion retailer Zara introduces styles (combinations of components) in excess of immediate needs, allowing it to identify the most popular products, create a tailored selection from them, and adapt to fast-changing fashion as a result.

Another advantage that complexity can confer on natural ecosystems is better coordination. That’s because the elements are often highly interconnected. Flocks of birds or herds of animals, for instance, share behavioral protocols that connect the members to one another and enable them to move and act as a group rather than as an uncoordinated collection of individuals. Thus they realize benefits such as collective security and more-effective foraging.

Finally, complexity can confer inimitability. Whereas individual elements may be easily copied, the interrelationships among multiple elements are hard to replicate. A case in point is Apple’s attempt in 2012 to compete with Google Maps. Apple underestimated the complexity of Google’s offering, leading to embarrassing glitches in the initial versions of its map app, which consequently struggled to gain acceptance with consumers. The same is true of a company’s strategy: If its complexity makes it hard to understand, rivals will struggle to imitate it, and the company will benefit….(More)”.