Cause-alities

Creating a Future

I recently spent some time speaking with the director of a well known consulting firm about the possibility of incorporating complexity science models into his practice.  I was struck by his choice of language as he described to me what he was trying to accomplish for his clients.

He said that he was trying to make the "cause-and-effect relationship between the clients decisions and the resulting outcome clear."  For example, he went on to say that sometimes his clients did not seem to realize that saving $2 here was going to cost $2000 somewhere else.  Or, alternatively, the client might have a correct intellectual understanding of a situation but due to momentum or other pressures found it impossible to make decisions consistent with the outcome they wanted.  He went on to say that this was symptomatic of a general difficulty in seeing business issues holistically.

I got really excited as I listened to his story.  Recently, I have been wondering if naming this blog "Cause-alities" was wise. Much writing about complexity science seems to emphasize the elusiveness of cause and effect relationships and seem to suggest that we cannot understand the consequences of our decisions.  Well, this is where the "attitude" part of my blog's tagline kicks in.

In matters of management I think that leaders need to invest in understanding as much of the cause and effect chain that drives their business as they can. They will find the real value of a "systems understanding" (to rename the cause-and-effect chain a little bit) in the realization that, to a large extent, the future they get is the one that they create through the decisions that they make. 

This is a vastly more powerful notion than the traditional "predict the future and I'll react" mentality.

What this boils down to is that in much of the business system the "cause-and-effect chain" is really a "cause-and-effect loop."  And our decisions are in fact part of that "cause-and-effect loop."

In practice, the only way to develop deep causal insight into business systems is through a complexity science simulation model.  As I've written before a spreadsheet, while sometimes useful, is inadequate to describe how a business works because business systems are feedback systems and spreadsheets simply don't have the expressive power to describe feedback. 

Finally, I have to acknowledge that not everything that happens in our business is something that we created through our actions.  The environment is important and external events are important.  Nevertheless, in most cases, the trajectory of the firm is a result of management leadership, not outside factors.

Modeling and Simulation

Industrial Science makes a good point about why we need simulation models and how, conceptually, the process of building a useful model works. 

I like to summarize the process of creating and using models into roughly three activities.  First, frame the problem by identifying the behaviors of interest, choosing system boundaries that will capture these behaviors and stating a structural hypothesis about how the system works to create the behaviors of interest.

Second, build a simulation model to test the hypothesis.

Finally, use the model to find management policies that improve system behavior..

Obviously, in practice this entire process is a bit iterative (you know: rinse, repeat).

In practice, applying complexity science means writing and using simulation models.

Harvard Business Review and Complexity Science

If you are going to write a blog about complexity science sooner or later you have to define, or at least describe, what you mean by that.  And, I'm afraid, my time is now. My reticence is due to the many who have tried and, basically, failed to write a useful definition.  Saying that complexity science is the study of complex systems isn't any help -- what's a complex system?  Wikipedia's discussion of complex systems is interesting but declines to offer a definition. 

So I was excited to see this article in the Harvard Business Review.  The authors

". .  believe the time has come to broaden the traditional approach to leadership and decision making and form a new perspective based on complexity science." 

I love that!  However, while their description of complexity science has some things to like, it reads like a laundry list of buzz words.  And then there is this assertion:

". . .in a complex system the agents and the system constrain one another, especially over time. This means that we cannot forecast or predict what will happen."

Seems to suggest that we should give up all hope!  If you've read my post on Strategic Planning then you know that I believe that we can take effective management action in complex systems and create a surprising level of predictability. 

From my perspective the defining characteristic of a "complex system" is that it produces complex dynamic behaviors from the interaction of its parts.