In 2010 IBM published a study, Capitalizing on Complexity, based on face-to-face conversations with more than 1,500 chief executive officers worldwide. The four main findings were as follows:
Today’s complexity is only expected to rise, and more than half of CEOs doubt their ability to manage it. Seventy-nine percent of CEOs anticipate even greater complexity ahead. However, one set of organizations — we call them “Standouts” — has turned increased complexity into financial advantage over the past five years.
Creativity is the most important leadership quality, according to CEOs. Standouts practice and encourage experimentation and innovation throughout their organizations. Creative leaders expect to make deeper business model changes to realize their strategies. To succeed, they take more calculated risks, find new ideas, and keep innovating in how they lead and communicate.
The most successful organizations co-create products and services with customers, and integrate customers into core processes. They are adopting new channels to engage and stay in tune with customers. By drawing more insight from the available data, successful CEOs make customer intimacy their number-one priority.
Better performers manage complexity on behalf of their organizations, customers and partners. They do so by simplifying operations and products, and increasing dexterity to change the way they work, access resources and enter markets around the world. Compared to other CEOs, dexterous leaders expect 20 percent more future revenue to come from new sources.
Interestingly, IBM refer to what they call the “complexity gap”. 79% of CEOs expected a high degree of complexity over the next 5 years, only 49% felt prepared for it. IBM use the term”standouts” for those companies best able to handle complexity. The three main factors which led to the success of these companies in a complex environment were:
- Embodying creative leadership
- Reinventing customer relationships
- Building operational dexterity
It is interesting that the CEOs rated creativity as the most desirable leadership quality best suited for dealing with complexity. As the report states:
CEOs recognize that leading creatively will require them to shed some long-held beliefs. Their approaches need to be original, rather than traditional. They must be distinct and, at times, radical in their conception and execution, not just marginally better than existing models or methods. Or, as one Telecommunications CEO in India put it:“Creativity in everything.
The report then continues to look at how these CEOs defined creativity:
Creativity is often defined as the ability to bring into existence something new or different, but CEOs elaborated. Creativity is the basis for “disruptive innovation and continuous re-invention,” a Professional Services CEO in the United States told us. And this requires bold, breakthrough thinking. Leaders, they said, must be ready to upset the status quo even if it is successful. They must be comfortable with and committed to ongoing experimentation.
When I read the report, the definition of complexity seemed to be based mainly on the growing interconnectedness of our world. However, I would suggest that at times, the report mixes up “complicated” with “complex”, such as these recommendations:
Simplify whenever possible. Simplify interactions with customers. Be ultra-easy for customers to do business with. Eliminate unnecessary complexity so that customer-related policies and procedures, and access to products and services, are effortless from the customer’s point of view.
Keep the focus on being intuitive. Simplify products and services by masking complexity. Deliver rich functionality to customers through simple interfaces. Provide deeply valuable products and services that are easy for end users despite the necessary and desirable underlying complexity. Understand which features customers want to influence and when they prefer not to have to make choices.
Simplify for the organization and partners. Be absolutely clear in communicating organizational priorities and what is expected from whom. Eliminate bureaucracy and implement lean processes. Integrate functions to create empowered teams and enable faster decisions.
All of the case studies in the report emphasise how if complexity is mastered, more growth can be achieved. Here is the Volkswagen case study:
Thanks to this “glocal” approach, the Volkswagen Group enjoyed year-on-year EBIT growth between 2004 and 2008. And in 2009, it sold more vehicles in China than in Germany — proof of its foresight in being one of the first Western carmakers to set up operations there.
There is also this statement about how IBM can help companies deal with complexity by “anticipating change”:
At IBM, we collaborate with our clients, bringing together business insight, advanced research and technology to give them a distinct advantage in today’s rapidly changing environment. Through our integrated approach to business design and execution, we help turn strategies into action. And with expertise in 17 industries and global capabilities that span 170 countries, we can help clients anticipate change and profit from new opportunities.
One famous framework for helping organisations understand complexity and how to manage it is the Cynefin framework developed by David Snowden.
This separates situations into four main types
There is a fifth realm where you do not actually know what state the situation to be managed is in. Depending on the situation, many different management techniques can be used, hence the model is a simple decision-making framework for managing situations, the overall objective being to move from the chaotic to the simple. Note how there is also a dangerous “cliff” between the simple and chaotic realms. This is where a seemingly simple situation can rapidly descent into a chaotic one if not managed properly.
Why have I written all of this? Well I have a different way of looking at complexity, and perhaps unlike these business management approaches, I begin by looking at the science of complexity, and how complexity is used in science to leading to deep insights about our world.
Maybe the insights could possibly characterised as follows (although these points are by no means comprehensive)
- The higher the complexity, the more stable the system.
- Chaotic systems while fully deterministic, are not predictable.
- Order can emerge from chaotic systems, such as chemical reactions, ant colonies, and brain cells.
- Emergent properties of systems shows us that some properties can not be predicted based on an analysis of the parts.
- The universe is inherently creative. Whereas some see evolution as highly improbable, others see the generative order of living systems as highly probably.
Order can be perceived in chaotic systems. This order though can be understood when an analysis is done not by looking at the composition of the parts, but at the relationship between the parts, including spacial and temporal relationships. The same order can therefore be seen to emerge from radically different systems in terms of physical, chemical and biological composition.
There is therefore a difference in the use of the words “chaotic” and “complex” compared with their informal use in the business world. We are alive on this planet not because nature has simplified itself over time, but due to the complex relationships of all living and non-living things on this planet. Complexity in nature does not lead to either “chaos” or “unlimited growth” but to stability, as can be seen by the many organisms which have survived often over millions of years. Now that is sustainability.
Many of you who are regular readers of my blog may be familiar with this slide, which is referred to as Jung’s mandalah, as taught by Stephan Harding at Schumacher College. (Stephan is also the author of the book Animate Earth – Science, Intuition and Gaia.)
While the IBM report quite rightly raises the issue of creativity, I have a slightly different take on creativity. For yes, creativity is indeed required to fully grasp the concepts and insights of complexity theory, but these insights do not come through the thinking component of our minds alone. They come through fully developing our sensory capacities, intuition and feeling. Only then can truly creative solutions be arrived at.
This for me is what truly integrated thinking is, and is not something that can be grasped or taught in a short workshop, seminar or academic series of lectures. The path of achieving this way of knowing the world and being in the world can be seen as a journey, maybe a pilgrimage, and one that is by no means easy. In fact, it can be quite disturbing to shift from one’s comfort zone in terms of how you relate to the world, and many can not do this. The thinking mind can be an awful trap, trapping us into believing that there is one one real way to know the world, and that is through a “scientific” mindset, one where the abstract is often more real for us than the sensory world.
But for me this is how we move, as Einstein suggested, to a new level of consciousness to solve problems previously created at a lower level of consciousness. The IBM report suggested that CEOs need a bold new way of thinking, but for me that is not enough. We need a whole new way of knowing the world, and that is what Integral Thinking really is all about. Are these CEOs and IBM really going to rethink growth?