Complexity Theory vs Strategic Delivery
Unknown unknowns, how do we know?
Before I start this article two bits of housekeeping;
- If you read my first foray in to article writing and have comeback to read this then thank you :-) I appreciate all the kind words and feedback I have received so far. Although this topic wasn’t suggested as my next article I decided to write on this because….
2. Complexity theory is something I find interesting, I dig it. However, I am no expert but I was inspired to put some words down on this because of this David Perell quote “Read to collect the dots, write to connect them.” So apologies in advance if this article involves a lot of dot connecting.
Complexity
So what do I know about complexity? My first real understanding of this came many years ago whilst reading Jurassic Park — random but bear with me - and as the characters do their best to not get eaten by the lovable reptiles, Ian Malcolm (Jeff Goldblum) states “What you study, you change”.
This was one of those little nuggets of wisdom that was so simple, but I had never really thought of it before.
“What you study, you change” was attributed by Ian Malcom to Heisenbergs Uncertainty Principle but is actually the Observer effect!
As soon as you observe something you can impact that “something” in unforeseen ways, what you observe or build — say a dinosaur theme park or a strategy — may be perfectly practical when you model it, but as soon as you open your strategy to the world there are numerous factors that can impact this. There are always other forces perhaps ones you don’t know exist (Unknowns) or that do not even exist yet (Unknown Unknowns) that may impact behaviours.
You obviously can only plan for what you know, but perhaps this reflects the importance of due diligence, do your homework and uncover as many variables as you can. The more factors you can build in to your modelling the more robust your strategy will be.
Complexity and Strategy
Whilst thinking about the various ways uncertainty and complexity can impact strategic delivery I have split my thoughts in to two categories:
Internal factors
In my first draft I had originally written a long old list of internal factors that could impact a business, but scratch that! Actually what is more important is; is your strategy, the organisation, the “you” able to deal with internal pressures and change?
- Do you have staffing capacity in case you lose employees at short notice?
- Can your organisational structure handle any change needed to deliver new strategies?
- Are managers able to communicate to their direct reports effectively? Does your messaging get lost as it is passed through the organisation?
- Are employees incentivised and engaged to deal with new ways of working and embrace change?
- Are you able to recognise change within your own organisation and able to react to it?
Any of these internal factors (plus plenty more) can impact your chances of success, sometimes this can be like whack-a-mole, where as you cover one issue this may spark off a fresh and completely new issue to pop up.
There are various tool to help you deal with this but perhaps some of the most helpful approaches you can take is ensure you have a shared understanding across the organisation of the vision and strategy and have effective feedback loops in place to track how successful your plans are tracking.
External factors
I don’t think that understanding the danger of complexity theory means you can avoid the impacts of unforeseen events, but it does mean you can prepare and build a robust enough business model to survive them and a framework that lets you react to them.
Now I suspect everyone can think of an unforeseen external event that can impact a business!
As a more specific example, a sector that has done well out of our recent need to all stay at home is the food delivery service. In the UK the big players are Deliveroo and UberEats and in the US they have DoorDash, GrubHub and UberEats all of whom are well known and taking plenty of orders but were really struggling to make a profit out of food delivery. Who knows what would have happened if that world hadn’t changed but huge swathes of the population staying in and ordering out gave these companies an opportunity to survive until we started opening up again and profits dropped once more.
That unexpected surge in profitability gave these companies a chance to invest and pivot into other directions, now they are expanding from trying to increase the delivery basket size “whilst we are delivering your KFC shall we pick up some toilet rolls and a dishwasher tablets for you”, to the more profitable alcohol delivery service and even delivering for big supermarkets, users can now pay for delivery from their local store to their home via UberEats.
Where Amazon are the kings of next day delivery these companies are looking to own the next hour space. (for those interested in this specific example there is a great podcast on it by Business wars “Food Delivery Wars”)
But of course the unknown may not give you that extra burst of cash revenue that can propel to you to success, changes in economies can affect in so many ways, impact may change and sometimes what was originally beneficially and feels like a great success may turn out to be negative even though your strategy was sound tides may turn and factors change. The internet helped Jeff Bezos expand from running a small online bookstore to going in to space But how many companies didn’t react to the same digital age and are now distant memories (remember Kodak, Blockbuster and Wimpy)?
How to Pull this all Together
Going back to my youth (ending like I began) in distant past when I studied Economics we talked about Ceteris paribus or “everything being equal” this term meant when doing modelling we could say, in the short term if X moves this way then Y will move that way e.g. Supply and Demand.
Everything being equal is often how strategies are created, “based on where we are now and what we know at the moment we should do this”, based on the current factor of X we should do Y. That isn’t necessarily a bad thing but perhaps we should just be aware that X can change or perhaps Z will turn up to confuse things for 6 months. Things change, people change, organisations change and economies change, just be aware that it happens build it in to your framework and ensure that you and your organisation is well equipped to handle instability and can adapt to the ever changing tapestry of life.
Hopefully you have found my attempts to “connect the dots” on complexity interesting, it is something I am still reading and learning about so please get in touch with any thoughts or resources that you have enjoyed.
Have a nice day
Alex
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