Should ‘complexity’ deserve any undue respect in business or in life? Or is ‘complexity’ given? Complexity is integral and needs to be managed.
For the sake of simplicity, let us divide business environments into two extremes - difficult and rapidly changing, and, business-as-usual with relative stability. The ease of operation in these two respective environments depends upon the degree of ‘volatility’ in the former and the degree of ‘complexity’ in the latter. Hence what volatility is to a rapidly changing business environment, complexity is to a stable, business-as-usual environment.
Volatility is the measure of business environment during ‘warlike-time’, while ‘complexity’ is the measure of business environment during the equivalent ‘peace-time’. It is not that complexity or volatility are mutually exclusive, but the quantum of presence will be dramatically different. An environment that is highly volatile and highly complex leads to chaos. Volatility is also a notch above uncertainty, unknown or ambiguity. This is because volatility is the effect while the other three are its cause. Same is the case with complexity – it is the end effect. To get a clearer answer let us turn to the omniscient STA-Strategy-Triangle (or the Space-Time-Action triangle).
As stated earlier, the combination of space, time and action (STA) as a fundamental driver of outcomes has been core to human thinking across the ages. The combination of these three fundamental dimensions of space, time and action provides a powerful business strategy framework, where time represents market state and operating conditions - hence opportunities, space represents firm’s operational territory hence strengths, and action represents execution, thus mimicking lifecycle.
Furthermore, we have also seen earlier that uncertainty, unknown and ambiguity do not represent activity in the same dimension or same plane, something that management researchers have erroneously assumed. They represent three distinct dimensions on the Space-Time-Action axes. Uncertainty is a dimension of time, unknown is a dimension of space and ambiguity, a dimension of action. The combination of the varying degrees of uncertainty, unknown and ambiguity thus drives the extent of volatility as an outcome. ‘Volatile’ environments are marked by rapid changes where teams either don’t have resources to control the state or don’t have enough time to elaborately plan and respond to such changes. To understand more about VUUA and chaos you may recall the following articles:
A Bit more on Complexity:
Consider the difference between a trained professional marathoner and a club runner. The race completion time will separate the two; so, will the types and degree of pain and discomfort in their respective bodies. The energy reserves, the pace to be maintained and prior body conditioning are all needed to be carefully managed. The professional marathoner manages it through patterns known to him – the knowledge of how his complex body would likely respond to under specific race conditions. He is also aware of any new pain that he has not encountered before – it warrants immediate changes and trial – and there is no guarantee he will come out of this winning as it not only about just completing the race.
Complexity is similar. It bears out of highly increased number of components in any system and the hopelessness of even trying to ascertain the accurate impact of every component on every other. Managing complexity entails recognizing patterns within a large ecosystem - just like the pain patterns for a runner. Patterns abstracts complexity and indicates broad likely outcomes.
Space, time and action together drive complexity on the STA Triangle. Larger the swathe of space under control, the more is the complexity and hence a more layered structure to manage this complexity. History is a fantastic testimony to such occurrences and Alexander the Great too had managed this complexity by founding many cities and using them as administrative centers. The freedom given to each satrap in general was high but under the overall aegis of the administrative framework dictated by Alexander. A similar relationship exists with any organization, a product or territory management – the larger it becomes, the more complex it gets to manage, maintain and keep it abreast with evolving needs. In short space-scale directly drives complexity. One hair-tearing example was that of the design of Boeing Dreamliner where nearly 40% of the components were outsourced to suppliers in many countries – a massive departure from their usual 5%. Boeing issued size-tolerances to the suppliers for these components. And guess what - many pieces manufactured by outsourced suppliers didn't fit together although they were well within tolerance limits. It is easy to fathom why! Such could be the impact of managing space-complexity.
Time is the second fundamental element that can inject immense complexity. It is both the undue passage of time as well as the timing of occurrence that is the cause of such complexity. This is the reason why logistics complexity increases tremendously with the increase in the number of cities, locations, carrier types, cargo types, last mile, etc. Algorithms, equally complex, are run to try and make transportation and deliveries most efficient, perfectly timed. But it is also virtually impossible to generate that ‘perfect’ answer – the combination of route, loading, pallets, etc., because there are too many unknowns. While designing electric self-autonomous vehicles, the complexity does not arise out of the assemblies and components; in fact, there are very few assemblies. It is the response time of the car, to oncoming traffic that is critical in its design, an example of time complexity.
Action, as you may have correctly guessed, is the third fundamental variable that induces complexity. Leaders widely use simplification as a mechanism to overcome action-complexity. For example, in a yearly business planning meeting Mr. Ratan N. Tata explained to all of us (sitting at the Bombay House board room) how he uses just two metrics to run a conglomerate of a hundred companies (thank you Mr. Tata for allowing me to cite this internal meeting in my book); or how Mr. Ambani uses a single metric to ascertain the state of any large project (thank you Mr. Lalit Jalan (LJ), my previous boss, on some of the inside stories at Reliance); or how the CEO of a large multinational company used just a single metric to ascertain whether their global ERP implementation was successful or not! Each one arrived at specific patterns based on their wisdom of understanding gathered over years; it was their unique way of breaking complexity into decodable patterns. While I will write more about complexity at a later point in time, I can only state that my lessons on life and business are the result of tutelage under some extremely profound teachers in addition to engagement with equally wise global leaders and colleagues, something, only serendipity could have engineered. It could be karma or just pure luck or both but undeniably beyond any reason.
Volatile vs. Complex. Application of Space-Time-Action Strategy Triangle from the book, Achieving Successful Business Outcomes: Driving High Performance & Effective Transformations in a Continuously Evolving Business Environment by Alok K Sinha, Taylor & Francis, Routledge Publishers, NY & London, March 2020. Soon to be released Indian Print, June 2020.