The collapse of complicated business models

Clay Shirky, in the collapse of complex business models, notes:

Bureaucracies temporarily reverse the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.

The premise of his article is that successful organizations and industries become more complex over time and are unable to embrace new ways of doing things, which at the onset are much simpler. He discusses the complex television industry and how it cannot produce simple, and low cost, fare for the web.

I’m not sure if complexity is the issue. I see it more as complication. Companies and industries start out as relatively simple operations and then become more complicated. Complicated systems can be analyzed, and we can tell how things work. Modern organizations are not complex, they are merely complicated. A complex organization could not be managed.

The real problem is on the outside, not the inside, of the typical complicated organization. The outside environment has become complex and the complicated organization lacks the ability to deal with it. Systems like the Neilson ratings don’t give us the kind of information we need to make decisions on programming. The media landscape is too fragmented to completely analyze.

The Cynefin framework describes the complicated & complex domains as:

  • Complicated, in which the relationship between cause and effect requires analysis or some other form of investigation and/or the application of expert knowledge, the approach is to Sense – Analyze – Respond and we can apply good practice.
  • Complex, in which the relationship between cause and effect can only be perceived in retrospect, but not in advance, the approach is to Probe – Sense – Respond and we can sense emergent practice.

The typical large modern organization tends to thoroughly assess a situation before acting, assuming it can be analyzed. This does not work in complex environments where we need to first do something and then see what happens. We see this with Beta releases of web services, which adapt as they are used by more people. many web companies understand this.

I don’t see simplicity as the solution to dealing with complex environments. A new organizational structure is required that is 1) based on simple units but is 2) connected as a network that is much more complex than any hierarchical organization could ever be. This type of organization will be too complex to manage directly. It will self-manage and adapt. The best work structures to deal with complexity will be complex networks, and likely some mix of wirearchical, chaordic, democratic, etc.

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