In our second Newsletter, we introduced the topic of complexity and how companies must resist the temptation to hide from it, or to fear it.
Complex business decisions involve multiple factors that interact dynamically in non-linear and sometimes ambiguous or contradictory ways. These include stakeholders from internal departments, on all levels, and external actors and influences. Or even technological game-changers, such as ChatGPT and other AI technology. Often the complexity cannot be visualised or anticipated in advance, and the full complexity is first apparent in retrospect. Systemic ESG topics, for example, are generally too large and wide-ranging to gauge the precise effects of a single decision or action.
Some of these are unmistakable hard factors. Climate change, the effects of the pandemic, resource scarcity, a global economic downturn, and the resulting waves of economic migration – all have an immense social impact on how we will live and work in the coming decades. But we also must consider soft factors such as the demand for diversity, the skill gap, company culture, and integrity.
Even decisions that were previously simple have become more complex in recent years. Take the example of the purchasing department deciding which supplier to choose for their new product. The decision is no longer based on the best price and conditions. It must now take into account supply chain issues, sustainability concerns and regulations, company cash flow due to the economic downturn, changing consumer demands, and more.
To survive these challenging times, companies must learn to deal with – and even embrace – complexity. And they must also be able to clearly and convincingly communicate their decisions on complex issues.
Complexity and human nature
The problem is that humans are not wired to deal well with complex decisions. Our instinct, when faced with a problem, is to slow down, assess risk, and be cautious. Don’t rock the boat. If it ain’t broke, don’t fix it. Don’t make waves. There are a host of idioms explaining our natural resistance to change.
Ironically, as a species, we’ve managed to create an environment that has taken on a dynamic of its own and is changing so fast that we are falling behind in assessing and mitigating the implications. This fear of falling behind creates interesting contradictions, such as the ‘master innovator’ Elon Musk’s plea for a moratorium on developing LLMs, which certainly won’t happen.
Whenever we deal with pathbreaking innovation, there are upsides and downsides. Now, the downsides have become so massive in complexity and scale that we need a different approach than just retaining the status quo and enjoying our numerous unconscious biases. It doesn’t help that when we’re consciously doing things our processing time is hideously slow and when we indulge in our unconscious biases, we’re seemingly much faster (See Daniel Kahneman’s Thinking, Fast and Slow). We need other people and machines to solve the conundrum we’ve created, but that then adds to the complexity. And so on and so forth.
How to deal with complexity
But all is not lost. We advocate a ‘metamorphosis approach’ of continuous change to deal with complexity and balance economic stability and growth. For that, you need to build capabilities that we call meta-skills, i.e., skills that are non-technical, reflective, and analytical, but not in a purely “rational” sense. This allows you to manage systemic change rather than being distracted by topical issues, to distinguish between different levels of complexity and choose appropriate decision-making styles and processes, to be resilient in the face of overpowering challenges, and to remain human.
Jack Ma grew his company, Alibaba, from a small start-up with 18 employees in 1999 to an $8bn enterprise by 2015. Here’s what he had to say about change:
‘At Alibaba, maintaining organizational flexibility is an area of intense focus. A few lessons stand out from its experience—for instance, that it’s critical to build an expectation of change into the culture from the outset. “Embrace change” has been one of the company’s six core values since its early years. Its founder and chairman, Jack Ma, regularly emphasizes this theme with employees, investors, and customers. “In the information era,” he says, “change is the best equilibrium.’
Jack Ma is correct, change IS the best equilibrium, but the need to deal well with complexity now requires more than just embracing change.
Dealing with complexity requires not only changeability but a number of other activities. Among them are:
- Act intentionally and not impulsively, scan your unconscious biases with the help of other people, and make the most of diverse perspectives.
- See the context and not just the problem, and don’t oversimplify or smooth out issues.
- Sit with the context a while longer. Before hunting for solutions, be sure that you have correctly framed the questions that you want to have answered.
- Use data, AI, and computing power well to really understand what’s going on and not be cheated by your own unconscious biases.
- Role model change and the way you want people to deal with complexity. Be aware that the worst behaviour that is tolerated in an organisation is imitated by all.
- All this requires to value yourself – but leave your ego at the door.
The good news is: You don’t have to do this alone. Get in touch with us to find out how we can help you.