Table Of ContentFuture of Business and Finance
Johannes Strikwerda
Organized
Complexity
in Business
Understanding, Concepts and Tools
Future of Business and Finance
TheFutureofBusinessandFinancebookseriesfeaturesprofessionalworksaimedat
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Johannes Strikwerda
Organized Complexity
in Business
Understanding, Concepts and Tools
JohannesStrikwerda
AmsterdamBusinessSchool
UniversityofAmsterdam
Eindhoven,TheNetherlands
ISSN2662-2467 ISSN2662-2475 (electronic)
FutureofBusinessandFinance
ISBN978-3-031-25236-5 ISBN978-3-031-25237-2 (eBook)
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This book is dedicated to my granddaughter,
Nina, and her generation.
Preface
I enjoyed writing this book. Not because it was an easy process, but because the
perspectiveandtheideaofcomplexityhelpedme,asitwillthereader,tounderstand
in a new and fruitful way essential relations between familiar, concrete issues as
knowledge work, combinatorial innovation, exponential organizations, self-
managing teams, how information outmaneuvers structure, effective tactics to deal
with uncertainty, agility in relation how to be in-control, regnorance, adaptation
efficiency,CEO-effectiveness,bottom-upinitiatives,etc.Allthisisachievedwithout
losing oneself, and hopefully the reader, in obscure mathematical models or aca-
demic theories, whilst maintaining consistency with contemporary economic
developments and insights. I also experienced a paradoxical nature of complexity.
On the one hand, the complexity in business, as needed for economic growth, is
muchmorecomplexastraditionaltheoriesoncomplexityassume.Comparedtothe
complexity in business, there is even a kind of naïve simplicity in traditional
complexitytheories.Ontheotherhand,inbusinessanumberofpragmaticconcepts
andpracticesexisttodealeffectivelywiththegrowthofcomplexity.Thisispossible
because of a growth of knowledge and because of the growth of information. The
caveathoweveristhatnoteveryoneinsocietydelightsindealingwithcomplexityin
everydaylife.Forsomeweneedtoorganizesimplicityimplyingthatothersneedto
absorbcomplexitytomaintaintherequisitevariety.Oneofmyinterestsisinforma-
tion.Weliveinaninformationsociety,butwhatisinformation?Tomyjoyinthis
book,Imanagedtointegratetherichcyberneticinformationtheorywithcomplexity
theoryasaresultofwhichitbecomesclearwhyconceptslikemission,values,and
abstractthinkingaresoeffectivetodealwithcomplexity.Knowingone’spurposeor
mission and values also helps to avoid information overload. This also avoids the
trapoftryingtocopewithcomplexitybybrutecalculationsandusinglargeamounts
ofdata,whichseemstootrivialinanageofBigData.Tocalculateisnotthesameas
to think. The weakness of the ancient Greeks was that they lacked a system for
numerical calculations, whereas the Egyptians did have a method for numerical
calculations. The Greeks therefore were forced to think in order to understand,
resulting in a superior philosophical understanding, whereas the Egyptians did not
progress. That is what good managers do, they think and budget time for thinking
and reading. Another insight I learned doing the research for this book, the com-
plexityofaproblemorsituationisnotsomuchanintrinsicpropertyofthatsituation,
vii
viii Preface
butisinthefirstplacedefinedbyourownknowledge.Complexityinmanycasesis
subjective.Youwanttoreduceanexperiencedcomplexity?Growyourknowledge
and the world becomes simpler. That indeed is my personal experience. Actually,
one of the things helping me making complexity lighter to deal with is the insight
thatdifferenttypesofcomplexityexistandknowinghowtodealwithdifferenttypes
ofcomplexityindifferentwaysmakeslifeeasier.
The origin of this book lays in an invitation by Dr. Peter Kinne to speak on
complexityinbusinessforasmallaudienceinDüsseldorfinJanuary2016.Theidea,
sowasconcludedatthatseminar,istowriteabasictextoncomplexity,fromwhich
to distill more accessible presentations to be used in workshops with managers, a
taskaccomplishedbyDr.Kinneinseparatepublications.Mytaskgottrappedinan
emergencetypeofprocess,socharacteristicforcomplexsystems,makingcomplex-
ity even more complex by acknowledging that the elements in a complex system,
especially social systems, themselves are complex and that even the relations
between the elements are complex. But that brings complexity closer to daily life.
Thewritingofabookoncomplexityisacomplexprocess.
This book is in remembrance of my spouse, Nora van Delft, who after a
companionshipof45yearspassedawayjustbeforethebookwasfinished.
Eindhoven,TheNetherlands JohannesStrikwerda
Contents
PartI UnderstandingComplexityandtheEconomy
1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 TheNewnessofthisBook. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 WhatthisBookIsAbout. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 ObjectiveofthisBook. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2 Complexity3.0. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 TheUsefulnessofComplexity. . . . . . . . . . . . . . . . . . . . . . . 9
2.2 DifferentTypesofComplexity. .. . . . . .. . . . . .. . . . . .. . . 11
2.3 WhyComplexityTheory?. . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3.1 ObsoleteAssumptions. . . . . . . . . . . . . . . . . . . . . 13
2.3.2 InstitutionallyInducedComplexity. . . . . . . . . . . . 14
2.3.3 ComplexityofObjectives. . . . . . . . . . . . . . . . . . . 15
2.3.4 ControlWithoutBeingControlled. . . . . . . . . . . . . 17
2.3.5 ComplexityasProvenance. . . . . . . . . . . . . . . . . . 18
2.4 ComplexityTheoryandtheChangingNatureoftheFirm. . . 19
2.5 NewOptionstoOrganize. . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.6 AFirstUnderstandingofOrganizationalComplexity. . . . . . . 23
2.7 FromModernComplexitytoPost-modernComplexity. . . . . 25
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3 SimplicityandComplexity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.1 OurNeedforSimplicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
3.2 TwoTypesofSimplicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.3 SimplicityandPerspective. . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4 SimplicityVersusLimitedComplexity. . . . . . . . . . . . . . . . . 38
3.5 DominantLogic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.6 ComplexityandLanguage. . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.7 TheParadoxofTraditionalSystemThinking. . . . . . . . . . . . 45
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
4De finitionsofComplexity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.1 TheComplexityofComplexity. . . . . . . . . . . . . . . . . . . . . . 51
iixx
x Contents
4.2 ComplexityandSystemsThinking. . . . . . . . . . . . . . . . . . . . 52
4.3 Complexity,Cybernetics,andControl. . . . . . . . . . . . . . . . . 54
4.4 TypesofComplexity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
4.4.1 DetailComplexityVersusDynamicComplexity. . . 61
4.4.2 ObjectiveComplexityandSubjectiveComplexity. 63
4.4.3 DisorganizedComplexityandOrganized
Complexity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
4.4.4 OverviewofTypesofComplexitiesandTheir
Handling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
4.5 OrganicOrganizationsasIntelligentComplexAdaptive
Systems(ICAS). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
5 EconomicGrowth,Complexity,andInstitutionalConflicts. . . . . . 83
5.1 HowComplexityContributestoEconomicGrowth. . . . . . . . 83
5.2 ModeratingVariables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
5.3 TheLimitationofIntuitiveManagementBooks. . . . . . . . . . 89
5.4 AConceptualModelforEconomicComplexity. . . . . . . . . . 91
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
PartII OrganizationalComplexity
6 InformationandComplexity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
6.1 TheParadoxoftheInformationSociety. . . . . . . . . . . . . . . . 97
6.2 DiscursiveInformationandDisinformation. . . . . . . .. . . . . . 101
6.3 TheCyberneticConceptofInformation. . . . . . . . . . . . . . . . 106
6.3.1 Goal-Information. . . . . . . . . . . . . . . . . . . . . . . . . 106
6.3.2 MotivationorAxiologicalInformation. . . . . . . . . . 108
6.3.3 MaterialInformation. . . . . . . . . . . . . . . . . . . . . . . 110
6.3.4 EideticInformation. . . . . . . . . . . . . . . . . . . . . . . . 113
6.3.5 AccountabilityInformation. . . . . . . . . . . . . . . . . . 117
6.3.6 AllelopathicInformation. . . . . . . . . . . . . . . . . . . . 118
6.3.7 InterfaceInformation. . . . . . . . . . . . . . . . . . . . . . 119
6.3.8 CausalInformationandConceptualInformation. . . 119
6.3.9 PragmaticInformation. . . . . . . . . . . . . . . . . . . . . 127
6.3.10 TransactionInformation(TransactionData). . . . . . 129
6.3.11 ReproductiveInformation. . . . . . . . . . . . . . . . . . . 133
6.4 ComplexityandInformation. . . . . . . . . . . . . . . . . . . . . . . . 134
Bibliography. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
7 ComplexDecision-Making. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7.1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7.2 WhatIsaDecision?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
7.3 WhatIsaDecision-Problem?. . . . . . . . . . . . . . . . . . . . . . . . 140
7.4 Well-StructuredProblems. . . . . . . . . . . . . . . . . . . . . . . . . . 142
7.5 WhyByandLargeIsDecision-MakingSuccessful?....... 156
