By: Frank Buytendijk, chief marketing officer
Be Informed helps organizations embrace complexity, this has been our mission since the beginning. We’ve even using the same term, “embrace complexity”. In essence, fighting complexity is useless, it is a natural phenomenon. Harvard Business Review (HBR), the world’s most influential management magazine, acknowledges that and chose “managing complex organizations” as its theme in its September 2011 issue.
Here we highlight some of the statements in the HBR articles, and add our experience.
HBR: “Managing a business today is fundamentally different than it was just 30 years ago. The most profound difference is the level of complexity people have to cope with”
This trend is particularly visible in business operations. Compliance regulations, a wide variation of customer requirements and shorter product and strategy life-cycles make that administrative professionals and other knowledge workers can’t rely on conventional wisdom anymore. Mass customized products and processes have become the norm. Analyst firms such as Forrester and Gartner estimate the market for more unstructured and knowledge-intensive business processes to be 2-4 bigger than traditional structured business processes.
HBR: “It’s harder to place bets, because the past behavior of a complex system may not predict its future behavior”
We believe business processes and IT should work more “above the line”. This means that business logic is not embedded in custom code and business applications, but is stored in a so-called meta model. Once the rules of the games change, or you’d like to change the rules, this can be done without affecting the IT systems, it requires only changes in the model. This way you can still invest in a long-term IT architecture, but keep your options open, as the business keeps changing all the time.
HBR: “It’s easy to confuse the merely complicated with the genuinely complex.”
Here we have a different point of view. HBR defines complicated as a situation with many moving parts, but predictable patterns, like flying an airplane. Complexity, however, describes systems in which the interactions continuously changing. The same starting conditions may result in different outcomes. We’d rather see a more practical definition. We see complexity as a natural phenomenon, that organizations need to deal with. There are many moving parts, they can change all the time, or all of a sudden new moving parts emerge. Complicatedness, however, represents how you deal with that complexity in your organization. For instance, governance, business operations and systems may be complicated. Complicatedness can be reduced, in order to embrace complexity. For more information, go to www.beinformed.com/whitepapers and www.beinformed.com/takethetest.
We couldn’t agree more. We believe strategy formulation (or policy-making) and execution should be a continuous closed loop. Before making any strategic decision, the consequences should be clear. Simulation is a powerful tool for doing that. And these decisions should not be made in isolation, but a collaborative processes, involving multiple people and disciplines. We also don’t believe in “sticking to the plan”, we opt for “sticking to reality”. If you have business operations that can quickly follow any changes in the environment, there is less need to accurate predictions.
HBR: “Take a real-options approach”
Our research has shown that real-options thinking is not very well-known in the business world. But it should be, and we all know examples. For instance, a service oriented architecture is a real-options strategy: you invest in keeping your future options of use open. Be Informed is based on real-options: business processes are derived on the spot, and are based on the unique characteristics of every case. And once you change the rules, the system changes with it immediately.
HBR also publishes an interview with Legg Mason’s chief investment strategist, Michael Maubossin. He argues that in complex adaptive environments, we don’t really know how things are going to unfold, so it’s difficult to make forecasts or budgets going many years into the future. He refers to another HBR article, called “Strategy as Simple Rules” (2001), that recommends creating a set of decision rules that are clear to everyone, and that describe what the organization stands for. “Then you pretty much let people decide on the fly in the field what they think makes sense given what they see, without violating the rules.”
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