Your Organization is a Complex System

Every company (and organization) is a complex system–a network of interdependent components oriented towards a common goal. To meet market demands, these components must interact with increasing cohesion. Any company striving for sustainable growth today must understand this network and the broader network of relationships in which it operates.

A new kind of thinking

Traditional hierarchical-functional organizations are rooted in a paradigm of control based on fragmentation and local optima and are therefore largely unable to address Complexity. Transitioning to a systemic organization requires a new lens to interpret reality and a New Economics to guide decision-making. More importantly, it calls for a drastically improved ability to think–one that allows our rationality and emotions to coexist harmoniously so we can develop innovative solutions to seemingly unsolvable problems.

Managing complexity

To manage Complexity successfully, we must simultaneously address two fundamental needs; one is a profound understanding of the individual components making up the organizational system, the other is to understand how these components interdepend to transform inputs into outputs.

Protecting these needs creates an inherent conflict. We can verbalize it as follows:

If our goal is to manage complexity, and an element of complexity is its components, then we must understand the components, and if the simplest way to understand/manage the components is to break the complexity up, then we will want to break the complexity into its parts (focus on the elements that make up the structures).

On the other hand, if our goal is to manage complexity, and complexity is generated by interdependencies, then we must understand the interdependencies, and if the links that create the interdependencies exhibit a dynamic that needs to be studied, then we will want to focus on the interdependencies and dynamics (focus on the patterns).

We can capture this conflict visually:

This challenge can be transformed into a formidable opportunity if we look at the fundamental assumptions that fuel this conflict. While both the needs in B and C are legitimate, we perceive the conflict as unavoidable because we make the assumptions that:

the whole is equal to the sum of its parts;

no new properties emerge from interactions among the parts;

interactions among the parts are always and only deterministic and linear (mechanistic view).

These assumptions represent the mental models, or biases, with which we form our reality and they delineate the area of our cognition.

Harnessing the power of complexity

In a series of articles over the coming months, we will strive to present a plausible “way out” of this conflict. We will outline a viable path for companies to transition from the prevailing, silo-based organizational structure to one of whole system optimization capable of harnessing the power of Complexity.

The foundations of Science for Organizations began to be developed in the 1950s. In our opinion, the most relevant contributions came from two physicists, W. Edwards Deming, an American academic and founding father of the Quality Management movement, and Eliyahu M. Goldratt, the Israeli educator and management consultant who developed the Theory of Constraints (TOC).

Both Quality Management (which Deming later called Theory of Profound Knowledge, TPK, to distinguish it from superficial, commercial distortions) and the Theory of Constraints are expressions of the systemic thinking necessary to understand and manage complex systems. They both foreshadow a radical departure from conventional models of management based on the fragmentation created by hierarchical/functional structures (silos) and performance measurements that promote local optima.

Over the last 30 years, the foundational principles of Deming’s work and TOC have been cohesively integrated and elevated to the level of whole system management and organization design by the authors of these articles. The resulting methodology has been successfully transferred to dozens of companies and published internationally by leading publishers.

We are confident that Science for Organizations will give meaningful and actionable answers to the growing needs of any organization and a positive input to the development of a management culture fit for the 21st century.