3BBE: THE FUTURE OF ECOMMERCE PRESENTATION - LOUIS MALAYBALAY
Managing Complexity | London Business School
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CEO
At the heart of organisational
complexity is the battle between
emergence and entropy.
Julian Birkinshaw charts
the best way forward.
Are you managing
complexity?
2. Are you managing complexity?
What is complexity?
It is easy to label big companies as
overly complex. But what does this
mean in practice?
When a small business receives
payment for consulting work for
a big “megafirm”, and it takes
more than a year and a half to
be paid, that’s complexity.
2
3. 3
Are you managing complexity?
When companies become too
complex to manage, they create
costs for others.
Complexity is a double-
edged sword. It is never easy
separating out the complexity
we value from the complexity
we need to cut back on.
Two faced complexity
complexity
4. 4
Inventing complexity
There are three processes underway
that collectively determine the level of
complexity experienced by people in
the organisation.
Are you managing complexity?
5. 5
Are you managing complexity?
The allocation of roles and
responsibilities through some
sort of top-down master plan.
Design process1
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6. Are you managing complexity?
A bottom-up form of spontaneous
interaction between well-intentioned
individuals – known as self-organising.
Under the right conditions, individual
employees will come together to
create effective action. The role of the
leader is to foster ‘emergent’ order.
6
Emergent process2
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7. 7
Are you managing complexity?
The gradual trending of an
organisational system towards
disorder. Most companies are
only semi-open to outside
influences. The second law of
thermodynamics comes into effect:
a closed system will gradually
move towards a state of maximum
disorder – that is entropy.
Entropic process3
entropy
8. 8
Are you managing complexity?
As organisations grow larger
they become insular and
complacent. Inefficiencies and
duplications creep in. Employees
become detached and
disengaged. The organisation
becomes aimless and inert.
The problem with entropy
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9. 9
Are you managing complexity?
More and more the leader’s
job is to manage the social
forces in the organisation.
This can take very different
forms.
So what can we do
differently?
10. 10
Are you managing complexity?
This is the equivalent of tidying your
teenager’s room. It involves taking out
layers of management, getting rid of
old bureaucratic processes that are
no longer fit for purpose, or replacing
the old IT system.
Keeping entropy at bay1
11. 11
Are you managing complexity?
This is the equivalent of giving a
bunch of bored teenagers a bat
and ball to play with. It is about
providing employees with a clear and
compelling reason to work together
to achieve some sort of worthwhile
objective.
Inspiring emergent action2
12. 12
Are you managing complexity?
Leaders have to continually
look for ways of bringing new
perspectives into their company,
and exposing internally focused
procedures to external scrutiny.
Keep the company open and transparent3
13. 13
Are you managing complexity?
1.The art of managing complexity
It has to be tackled in a thoughtful
and holistic way. Leaders need to
think about both faces of complexity
– the costs and the benefits.
14. Julian Birkinshaw (jbirkinshaw@london.edu) is
Professor of Strategy and Entrepreneurship at
London Business School and the author of
Becoming a Better Boss (Jossey Bass, 2013).
The full article was published in London Business
School Review Volume 26, Issue 3 2015.
Visit the website: www.london.edu/lbsr