Unlocking the Secrets of Complexity: Shaping Business Administration for Today's Ever-Changing Lands

What are the drivers of today's business administration, and what conclusions can we draw from them regarding the changing requirements for organizations? Science, particularly business administration, is always shaped by the time in which it emerges. What principles can we derive from the considerations of our time? When attending startup events, terms like "Lean Startup," "Scrum," or "Growth Hacking" are commonly heard. What do these concepts have in common? All these concepts give you principles of how to deal with complexity.

While large enterprises often still act risk-averse, value predictability as a high asset, maintain large hierarchical structures, and focus heavily on efficiency, we see a contrasting approach in the world of innovative enterprises. These innovative ventures operate in an environment of absolute uncertainty, in contrast to already established large companies. In many cases, neither the exact product benefits nor the corresponding customer are recognizable at the beginning of the venture. The environment they navigate is highly complex, while traditional industrial enterprises and established companies operate in a complicated environment. To better define these two terms, the Cynefin framework is introduced. This model was created by scientist and business consultant Dave Snowden. Snowden's goal was to clarify the evolutionary nature of systems. The model is based on approaches from cognitive science, anthropology, evolutionary psychology, and theories of adaptive systems. The model classifies systems into four states. The following graphic illustrates this classification. These four states are Complex, Complicated, Chaotic, and Clear.

(https://en.wikipedia.org/wiki/Cynefin_framework#/media/File:Cynefin_framework_2022.jpg)

"Complex" refers to problems or systems in which the number of variables has increased to the point where analysis for possible solutions is no longer possible. This means that reactions to interventions are unpredictable in this area, and it is characterized by "trial and error." In complex systems, the connection between cause and effect only becomes apparent after the action, meaning whether it was a good or bad decision. Complex systems require continuous control of results, readjustment, and repeated attempts. According to D. Snowden, it is helpful to seek perspectives from different individuals in different areas that are useful for decision-making. Snowden describes the goal as "Emergent Practice" with the approach: Probe - Sense - Respond." An example of a complex situation could be the invention of a new product, a poker game, or dealing with a pandemic.

The "Complicated" quadrant represents problems in which there is a connection between cause and effect, but it is not easy to identify. To solve the problem or navigate this system, "expert knowledge is required to make decisions and solve problems. A variety of variables ensures that relationships are no longer linearly describable, and there are usually multiple solutions. To utilize the available information, analysis is necessary. The exchange of knowledge and experience is crucial for complicated systems. When analyzing the problem, it is important not to focus solely on the problem but also to maintain an awareness of the connections. An optimal team composition for addressing complicated systems includes both experts and non-experts. It involves finding obvious solutions in terms of "Good Practice." The approach here is: Sense - Analyze - Respond." Examples of complicated problems is the improving on an existing product or solving a mathematical equation in which the steps are clear.

"Chaotic" refers to systems in which there is a connection between cause and effect, but it cannot be identified. A metaphor for this would be flying blind in dense fog. "In such situations where no known structures exist and no new ones are established yet, direct action is the most sensible approach, as such situations traditionally indicate an emergency. The goal is to stabilize the system as quickly as possible, after which the approaches of complex and complicated systems become possible again. Since this involves a "Novel Practice," the best approach is: Act - Sense - Respond." Examples of chaotic problems could be natural disasters, revolutions, or wars.

In the "Clear" domain, it's about simple causal chains. In other words, if-then relationships. "In these simple, obvious connections, we can usually rely on 'Best Practices' because they involve routines and processes that are already known and for which solutions already exist. Decisions in this domain are often easy to make. Likewise, there is no need for experts to execute tasks categorized in this domain, as the simple connections can be quickly understood. This domain is characterized by the following approach: 'Sense - Categorize - Respond.'" Examples of simple problems are the mass production of the same product, tidying up or to paint the wall in your apartment.

The Cynefin Model is useful for understanding the system in which one finds themselves or the nature of the problem they face. It serves to expand people's horizons to the facet of complexity and criticizes a pure classification of problems into the "Complicated" and "Simple" domains. In the book "Multi-Ontology Sense Making: A New Simplicity in Decision Making" by David Snowden, the creator of the Cynefin Framework, it is criticized that our current perspective only acknowledges two states. The first being the known and the second being the unknown, which can be recognized through appropriate investigation and a pure cause-and-effect principle. He also mentions Frederick Taylorstating that he and most management theorists after him assumed a deterministic mechanism when dealing with the control of a company. He asserts that it is important to question this worldview.

One can argue, as described in the last blog post, that business theories, especially those dealing with the management of companies and their resources, are shaped by industrial companies and Taylorism. This means that they have a strong focus on complicated or simple problems. This makes sense since there was essentially a certain level of stability, and industrial companies strive to achieve economies of scale as quickly as possible to produce a product efficiently.

"Do the right thing" vs. "do the thing right."

While efficiency is related to "doing the thing right," we need effectiveness - "doing the right thing." Particularly, innovative ventures find themselves in a field of high uncertainty and thus maximum complexity. Developments such as generative AI, Web 3.0, as well as social media and e-commerce, significantly change the playing field on which new innovative products must assert themselves.

Operating from a mindset for dealing with complicated problems when facing complex ones will not only be misleading but even counterproductive. This is partly the explanation of why Nokia did not invent the smartphone, and why the ice industry, back in the old days, did not come up with the refrigerator. We know the fate of both.

Most of the current organizations are set up for complicated problems. It is in their DNA. It is in the DNA of our business administration and arguably in our society. With the current challenges, we need an organization set up that can successfully deal with complexity. The Teal has this capability ingrained in its DNA.

Finally, in the next blog post, we will discover the different stages of organizational models in the history of humanity and with that, the Teal Organization.

Stay tuned, and see you soon. 👋

• https://en.wikipedia.org/wiki/Cynefin_framework#/media/File:Cynefin_framework_2022.jpg

• ‘Multi-ontology sense making a new simplicity in decision making’, Management Today, Yearbook 2005, Vol 20 No [Preprint]. Available at: https://www.researchgate.net/publication/7793823_MultiOntology_Sense_Making_A_New_Simplicity_in_Decision_Making (Accessed: 16 August 2022).

• Nechkoska, R.P. (2020) Tactical Management in Complexity Managerial and Informational Aspects. Springer.

• Mauritz, S. (2020) ‘Was ist das Cynefin Framework?’, Resilienz Akademie. Available at: https://www.resilienz-akademie.com/cynefin-framework/