It’s Not Complicated: The Art and Science of Complexity in Business

It’s Not Complicated: The Art and Science of Complexity in Business

by Rick Nason

This book may fundamentally change the way you think. Or it may give you a framework to understand why you intuitively know that conventional management practices are sometimes incongruent with reality.

“This book is about systems thinking, and more specifically the important distinction between simple, complicated, and complex systems as applied to common business problems… The world of business is usually complex rather than complicated. That may seem like word play, but the difference between ‘complicated thinking’ and ‘complexity thinking’ is profound. This important distinction is well accepted in the scientific community but is virtually unknown in business.” Nason explains, “The ability to manage complexity is the key to competitive advantage.”

Simple systems can be easy like making coffee or difficult like teeing off in golf. Complicated systems have defined rules or procedures and replicable outcomes, such as accounting, manufacturing, or a mechanical watch.

“Complex tasks cannot be completed by following a recipe or a set of instructions, or even an extensive list of rules and regulations… Complexity involves an unknown number of steps… Complex systems are neither predictable nor reproducible… With complexity there can be many different definitions or degrees of success.” Complex systems include outside sales, marketing, and R&D.

“Complexity explicitly accounts for the interconnectedness of things and how that interconnectedness leads to fascinating characteristics such as adaptive behavior and leaderless emergence… The quality of being adaptive means that the actions of all the elements in a complex system affect one another, and in response each of the elements changes accordingly. Furthermore, change is continuous and ongoing.”

“The most fundamental and important outcome of a complex system is a property called emergence. Emergence occurs when interconnected elements, such as a sector of consumers, or the actions of an industry, or even economic developments, evolve in ways that produce trends or patterns that look highly organized but in fact occur without any definable guiding hand… For instance, the ups and downs of the stock market exhibit emergence. There appear to be up trends and down trends, but there is no mathematical model that can predict which way the market will go next.”

“All of the players in a business setting—the company, its employees, the industry, its competitors, the customers, the regulators, the financial backers, the general public, and other players—are constantly adjusting their actions and opinions, based on the changes in actions, opinions, and perceptions of others. It is this never-ending and unpredictable dance that ultimately defines complexity. It is a phenomenon that scientists label emergence and that business calls competition.”

“Unexpected and weak connections often produce key turning points and create emergence… Because of the Butterfly Effect and feedback loops, the actions of a relatively few number of people [can become] a major movement.”

“With greater globalization there is greater connectivity, which acts as a catalyst for complexity. Consumer trends and ideas that start in one part of the world are quickly communicated and copied across borders.”

“A complicated system can be dealt with in a reductionist way; that is, the pieces of a complicated system can be dealt with individually and separately. With complexity, because of connections, emergence, and serendipity, the system can only be understood and managed as a whole. It is not possible to reduce a complex system to its individual component parts.”

“Complex systems are nuanced and require a nuanced approach… Complexity is based on having very few simple heuristics” rather than rigid rules.

“One of the key requirements in managing complexity is the need to continuously observe and react to patterns and trends rather than focus on a fixed target—to maintain a ‘manage, not solve’ complexity mindset… This implies managing spontaneously and in the moment, rather than relying on a pre-ordained plan. Constant and ongoing adjustments need to be made using a ‘try, learn, and adapt’ methodology that require experimentation, creativity, and a tolerance for failure and miscues rather than knowledge, obedience, and conformity.”

“Ultimately, adapting means changing along with the environment rather than trying to get the environment to change.”

“Counterintuitively, organizations need to purposely introduce randomness into their operations for complexity success… Minimizing rules while introducing randomness means that at any given point in time there will be apparent inefficiencies in the system… Optimization… tries to minimize slack whenever possible, and, for certain complicated tasks such as keeping a factory functioning, this makes sense. However, for complex systems this approach prevents the system from learning and developing more efficient processes that are more suitable for emerging contexts.”

“Managing complexity is more of a mindset than it is a set of steps that can be learned… A complexity mindset is a creative mindset. It focuses on what can be, rather than what is.” Nason adds, “Complexity is a concept that may best be grasped through experience rather than taught.”

The author writes about the recent obsession with data and analytics. “It is tempting to do research and management where there are data. It gives the manager a feeling a feeling of doing something useful. However, managers need to be careful of falling into a trap of managing the measurable rather than managing the important… Often, particularly in cases of complexity, it is situations for which there are no or limited data that most need management’s attention.”

The book includes a chapter on strategic planning. “In complex situations, the questions that are asked are generally more useful and valuable than any answers that might be forthcoming.” Nason cites Peter Schwartz, author of The Art of the Long View. “For Schwartz… good scenarios involve making connections and visualizing how elements can evolve.” The author also cites management strategist Henry Mintzberg: “The most successful strategies are visions, not plans.”

There is also a chapter on risk management. “Audits and checklists are appropriate risk-management tools when the risk is simple or complicated in nature. However, with the inherent connectedness and globalization of business today, important risk issues are almost always complex. Risk management is by necessity an iterative and emergent process… Risk managers need to learn to recognize the emergent properties of risks. They need to expect phase shifts, paradigm shifts, ambiguity, and nonlinear behavior in the risks they are or will be faced with. Complex risks must be managed, not solved… To deal with complexity, risk management needs to take a holistic approach. Risk is not confined within separate independent boxes. Everything affects everything else, in often unpredictable ways.” The author also comments on counter-terrorism and the financial crisis in the context of complexity.

“The more complex an issue is, the more valuable the role of the manager becomes… In the search for operational and cost efficiencies, tasks that are simple or complicated have gradually been eliminated or outsourced [or automated].”

“Managers need to learn to become diverse learners… and develop new skills and new ways of critically looking at the world. Random learning is a counterintuitive but key strategy to deploy. Examples of random learning include reading magazines far from one’s normal areas of interest, taking part in unique cultural or artistic events, and talking to professionals from vastly different areas of business.”

“We are living in the era of specialization, where experts know increasingly more about an increasingly narrow field of knowledge… We need to revive the concept of the Renaissance person to cope with an increasingly connected world that is becoming more complex and less complicated. ‘Complexity’ is expansionist, while ‘complicated’ is reductionist. ‘Complexity’ is eclectic, while ‘complicated’ is didactic. The need for individuals whose knowledge and interests range across a variety of fields and disciplines is greater than ever. It is regrettable that the current prevailing educational paradigms seem to run counter to this.”

“Complexity abounds in business [but] most business functions also consist of components that are simple or complicated processes… Having an ability to deal with both complicated and complex tasks is the ideal for the business professional as well… You need to be creative as well as analytical.”

“Complicated thinking belongs in the world of ‘organized and tidy’ while complexity characterizes the imperfect untidy world, but also the world in which managers most often find themselves… It is essential first to determine what type of system you are faced with—complicated or complex—and then to learn to accept ‘maybe’ as a possible result in the presence of complexity.”

“Shifting to a complexity mindset requires confidence in one’s ability and in the benefit of taking chances and accepting risk. It requires an intellect that can repeatedly switch back and forth between complicated thinking and complexity thinking.”

“It is increasingly a company’s ability to recruit creative thinkers with a complexity mindset that will separate the strategic winners from the losers.”

Rick Nason is a finance professor who has a master degree in physics and a bachelor degree in chemistry and math. This unusual background enables him to cross-pollinate ideas from science to business. It’s Not Complicated is an important contribution to the field of management with many intelligent insights.

Disclosure: I received a review copy of this book.

Nason, Rick. It’s Not Complicated: The Art and Science of Complexity in Business. Toronto: University of Toronto Press, 2017. Buy from Amazon.com

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