Editor | On 07, Sep 2019

Darrell Mann

At the end of last month, I published a blog article regarding, what I think is a better way of mapping complexity (Reference 1). It was a bit of a strawman. Something I thought might burn on exposure to the outside world. But so far it seems to have stayed somewhat flameproof, and hence now creates an opportunity to explore it a little more broadly. I thought what I’d do here is look at, probably the most important zone on the Landscape, the place where organisations, and especially innovation teams need to be in order to ensure that they have a chance of success in their endeavours. Here’s the Complexity Landscape model I ended the first blog article with:

Probably easiest to read the blog article if you want to know all the details regarding why the axes look like they do, and why the various different segments of the picture are labelled the way they are. In summary, though, the basic overall idea is to map the manner in which a system is being managed relative to its surrounding environment. This might mean, for example, a ‘system’ comprising a team of individuals working within a larger organisation, where the rest of the larger organisation is the ‘external environment’, or the ‘system’ could be the entire organisation, such that the external environment becomes the world beyond the boundaries of the organisation.

The four different segments of the vertical axis – chaotic, simple, complicated and complex – then relate to the four different strategies used to manage and coordinate whatever ‘system’ we are focusing on, and the four different segments of the horizontal axis represent the same four ways of segmenting the surrounding environment.

The most important line on the Landscape is what I labelled the ‘Ashby Line’. This line is named after the father of cybernetics and the person who gave the world Ashby’s Law of Requisite Variety. Which, to paraphrase slightly, states that the variety present in the system must be greater than the corresponding variety in the external environment if the system is to survive. The way the Landscape is drawn, an organisation operating above the Line satisfies Ashby’s Law, and one operating below the line doesn’t. The region above the line, therefore, becomes the ‘Resilience Zone’. This is the Zone that organisations need to be operating within if they are to be sustainably successful.

Hopefully, so far so good: organisations need to look at the complexity of their environment and make sure they possess a greater level of complexity management capability. What makes this difficult in real life are two big forces. Building slightly on the description I gave in the blog article, these two forces are:

Firstly, serving to cause the level of complexity in the external environment to increase are the effects of globalization and, more generally, the 2nd Law Of Thermodynamics which, crudely speaking says that the level of disorder and randomness of life, the universe and everything goes up over time. Or, almost, disorder tends to increase, but only so far as the so-called ‘edge of chaos’:

Whenever chaos occurs, it tends to be sufficiently unstable that ‘some’ sort of order emerges. Tornadoes and other extreme (chaotic) forms of weather, for example, don’t last for ever. And neither do wars. And, though it might not feel like it at the moment if you live in the UK, neither will the chaos of Brexit.

The second force could be thought of as the F.W.Taylor Law Of Efficient Working. Since Taylor began studying ‘work’ and how to do it more efficiently, ‘standardisation’ as become the main modus operandi of nearly every enterprise on the planet. Standardisation is great for achieving economies of scale. Standardised operations are much more amenable to automation, and, if we can’t automate, we can at least break tasks down to small enough chunks that it becomes possible to rapidly train an unqualified person to do them. Unqualified people generally being cheaper to employ than qualified ones.

Whether ‘standardisation’ is a natural force or merely one that Taylor’s well-intentioned but nevertheless blinkered way of thinking has instilled deeply enough that most managers think it is natural, the overall effect is that when enterprises allow themselves to move in this ‘natural’ direction, they make themselves very vulnerable to crossing the Ashby Line in the wrong direction.

If ‘nature’ causes systems to veer in the direction of failure, that means enterprises need to deploy conscious strategies to ensure that they stay on the right side of the Line. Again, these fall into two basic categories: things we do inside the system to enable complexity to be accommodated and embraced, and things we do to manipulate the external environment and/or our relationship with it:

(Looking at the vertical arrow, I’m struck by how nearly everything described by W. Edwards Deming in his ‘Fourteen Points For Management’ is consistent with what organisations need to do in order to better embrace the inherent complexities of having humans working in organisations – Reference 2. Not that there can be such a thing as a playbook when it comes to managing complexity, but if there was, Deming’s fourteen points would be somewhere close to it.)

One of the measures we’re in the process of establishing at the moment is what we’re thinking of as an organisation (or team within a larger organisation) ‘Ashby Margin’. At the moment, the scale we’re looking at goes from -1 to 1. An organisation scoring ‘0’ is one that is sitting right on the Ashby Line. A positive score means they’re in the Resilience Zone, and a negative score means they’re vulnerable to failure. A score of -1 means they sit right on the Disintegration Line, and are in danger of falling in to imminent chaos. Our current suspicion is that there are presently more organisations operating with a negative Ashby Margin than there are those with a positive score. More on that front, no doubt, as we finalise how best to (automate) the measurement procedure.

In the meantime, let’s have a quick look at one or two examples of successful businesses and how their position on the Landscape enabled that success. I thought I’d use the automotive industry as my foundation, since I think that it’s the industry where some of the innovations that have taken place are already well known, and hence will ideally allow readers to focus on how they help explain the different portions of the Resilience Zone.

Let’s start with Henry Ford and the Model-T Ford. The Model-T was the first mass-produced car in the world. From 1908, when the first model was launched, through to 1927 when production ceased, the Model T was quite literally the ‘machine that changed the world.

The initial Ford story represents a classic example of an enterprise operating above the Ashby Line in the Simple-Simple domain. Ford took advantage of F.W. Taylor’s thinking about simplification and standardization of work, and at the same time was able to eliminate all of the complexity of the market by, a) making available a completely new step-change mode of transport to customers, and, b) saying to them things like, ‘any colour you like as long as it’s black’ (why black? Answer because this was the paint colour that dried the fastest, and so was the most time-saving). The market, in other words, did things Ford’s way, not the other way around.

This strategy worked for a while. But then Alfred P. Sloan at General Motors wondered if customers might want colours other than black. GM decided it was incumbent upon them to serve customers who were becoming increasingly sophisticated, by offering them a broad range of options and choices. The company achieved this by essentially throwing lots of money at the problem, creating multiple different brands to serve different type of customer, and lots of different factories, with some scope to design and manufacture vehicles that best suited their own chosen market niche. Alfred P, Sloan’s GM effectively moved to the Complicated-Complicated zone on the Complexity Landscape:

GM’s innovation, naturally, prompted all the other car manufacturers to move into the same domain. By the late 1920s there were close to 200 different car manufacturers operating in the market. Many of them, because GM had opened the dangerous door marked ‘the customer is always right’, were forced to adapt to the inevitable complications that came with fickle humans. The car industry became great optimisers, doing the best they could to offer customers as many different options as possible, while still being able to mass-manufacture with a workforce that was as unskilled as possible.

Give workers mind-numbing jobs for long enough, however, and its only a matter of time before customers begin to suffer the consequences. This is okay when their expectations – e.g. with things like reliability – are low, but over time, these expectations inevitably drift upwards and so it became incumbent upon the car companies to add things like quality, reliability, and life into their complicated economic calculations. It was only when Toyota hit their stride and established the Toyota Production System, however, that customers really began to experience a step-change. Mind-numbing dull work turns out not to be a great foundation for building reliable, long-lasting cars. In many ways what TPS was set up to do was instill the idea of ‘continuous improvement’ into the DNA of the business, and actively seek the brains of all the workforce to help make sure it happens. TPS effectively forced the car industry to do this:

Treat workers like they have a brain and empower them to implement the ideas that get generated within local ‘quality circles’ and you’ve crossed in to the Complicated-Complex Zone. Every automotive OEM has to some extent adopted TPS like procedures and protocols, but not all of them have genuinely crossed the complicated-complex boundary. Many are still hampered by command-and-control management systems that have adopted the tangible parts of TPS, but have largely failed to appreciate the importance of the intangible human emotion factors. Fortunately for those that haven’t, the automotive industry’s relation with the external world of the customer is still at the ‘complicated’ stage. Customer’s are offered lots of choice, but not yet a choice that allows them to buy anything other than a ton or more of metal and plastic. When customers begin to demand ‘mobility’ rather than a ‘car’, that’s the time the automotive OEMs will have to embrace the fact that their complicated marketing strategies no longer make sense, and that they will have to embrace a whole new level of market complexity. In that respect, we might already begin to see that the innovation of organisations like Uber, Lyft and Ola is that they’ve already made the fundamental jump into the complex market domain…

…whether they’re operating with a positive Ashby Margin is probably a matter of some debate at this point. One guarantee, however, is that whichever one of the three (or next new player) best builds the non-Command-and-Control heuristics needed to successfully operate in the Complex-Complex domain will be the one that gets to survive and thrive the longest, progressively sucking more and more of the value from the traditional automotive OEMs.

References

1.  ‘A Complexity Landscape’, www.darrellmann.com, 31 March 2019.
2. https://www.stat.auckland.ac.nz/~mullins/quality/Deming.pdf