RITA MCGRATH
YOU CAN’T TACKLE COMPLEX SYSTEMS WITH LINEAR THINKING Thought Sparks
As Daniel Kahnemann has pointed out to us, while the human brain is a remarkable organ, it also has its limitations. One of these is that it is built to conserve energy. What that in turn means is that we readily engage in fast, linear thinking when the challenges we face are complex. Forcing yourself to think differently is the key to untangling complex situations.
EXTREME OUTCOMES RATHER THAN EXPECTED ONES Rationally calculating likely outcomes often leads us to think of things lying along a bell shaped curve, with the most extreme possibilities the least likely. In complex systems, however, executives need to consider the possibility of extreme outcomes rather than expected outcomes. These can be positive (Google creates an entire category of applications and grows astronomically) or negative (Northern Rock, Bear Stearns and Merrill Lynch – once storied brand names – disappear).
NON-LINEAR AND PATH DEPENDENT
Complex systems are also non-linear and path dependent. What that means in English is that there is not proportionality between the investment in an element of the system and its effect, and that these effects accumulate over time. Some scholars call these “tiny initiating events” and they can have a disproportionate impact (this is sometimes called the ‘butterfly effect’).
SYSTEMS CHANGE IN EMERGENT WAYS The outcome of a business decision can’t be predicted in a complex environment, even if one could take into account all known variables at the time a decision is made. Consider competition in social networking and the advertising supported Internet we have today. Big winners include Google (worth a mind-blowing $1.53 Trillion); Facebook, or rather Meta (worth $458.69 Billion) and Twitter ($29.9 billion, depending on what kind of day Elon Musk is having).
SLACK, DISCOVERY AND LEARNING One implication of all this is that our conventional ways of investigating phenomena and understanding the world around us are highly unlikely to be the best way to put together an understanding of what data are relevant and what decisions should be the best. Ironically, complex systems may best be understood by qualitative and speculative practices rather than by ‘hard core’ analytics. To get this right suggests the need for some slack in the system, time to explore around what I’ve called the “edges” of the organization and diverse talents. This is not just a nice to have – it can be absolutely essential.
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