PHOTOGRAPHY: HARLAN ERSKINE 7/29/11 2:41:59 PM
Gökçe Sargut is an assistant professor at Governors State University, in University Park, Illinois. His research focuses on strategy and structural change in creative industries.
Rita Gunther McGrath is a professor at Columbia Business School. She researches strategy and innovation in volatile environments.
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ARTWORK Jen Stark, How to Become a Millionaire in 100 Days 2007, 1 million pieces of hand-cut paper, size varies (average: 3' x 3')
Learning To Live with Complexity
How to make sense of the unpredictable and the undeﬁnable in today’s hyperconnected business world by Gökçe Sargut and Rita Gunther McGrath
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SPOTLIGHT ON MANAGING COMPLEX ORGANIZATIONS
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anaging a business today is fundamentally different than it was just 30 years ago. The most profound difference, we’ve come to believe, is the level of complexity people have to cope with. Complex systems have always existed, of course—and business life has always featured the unpredictable, the surprising, and the unexpected. But complexity has gone from something found mainly in large systems, such as cities, to something that affects almost everything we touch: the products we design, the jobs we do every day, and the organizations we oversee. Most of this increase has resulted from the information technology revolution of the past few decades. Systems that used to be separate are now interconnected and interdependent, which means that they are, by definition, more complex. Complex organizations are far more difficult to manage than merely complicated ones. It’s harder to predict what will happen, because complex systems interact in unexpected ways. It’s harder to make sense of things, because the degree of complexity may lie beyond our cognitive limits. And it’s harder to place bets, because the past behavior of a complex system may not predict its future behavior. In a complex system the outlier is often more significant than the average. Making matters worse, our analytic tools haven’t kept up. Collectively we know a good deal about how to navigate complexity—but that knowledge hasn’t permeated the thinking of most of today’s executives or the business schools that teach tomorrow’s managers. How can we bring that knowledge to the fore? Let’s take a close look at what complexity is, the problems it raises, and how those problems can be addressed.
Complicated Versus Complex
It’s easy to confuse the merely complicated with the genuinely complex. Managers need to know the difference: If you manage a complex organization as if
it were just a complicated one, you’ll make serious, expensive mistakes. Let’s back up and start with simple systems. These contain few interactions and are extremely predictable. Think of switching a light on and off: The same action produces the same result every time. Complicated systems have many moving parts, but they operate in patterned ways. The electrical grid that powers the light is complicated: There are many possible interactions within it, but they usually follow a pattern. It’s possible to make accurate predictions about how a complicated system will behave. For instance, flying a commercial airplane involves complicated but predictable steps, and as a result it’s astonishingly safe. Implementing a Six Sigma process can be complicated, but the inputs, practices, and outputs are relatively easy to predict. Complex systems, by contrast, are imbued with features that may operate in patterned ways but whose interactions are continually changing. Three properties determine the complexity of an environment. The first, multiplicity,...