Creative management of complex systems

Table of Contents Cover Preface Introduction: Why Do We Talk About Complexity in Management? 1.1 Examples of complex and/or innovative projects 1.2 Complex systems, rationality and knowledge 1.3 Cognition and the theory of the firm 1.4 The entrepreneurial dimension 1.5 Conclusions The Evolution of Complex Systems 2.1 Adaptation, learning and flexibility 2.2 The nonlinear behavior of “imbalanced” systems 2.3 Autonomy and responsibility 2.4 Different evolutionary models 2.5 Implications for management 2.6 Closing remarks Steering Complex Adaptive Systems: Managing Weak Signals 3.1 Navigating the ocean of signals 3.2 Managing interdependences and dancing with the system 3.3 Surfing on the wave 3.4 Conclusion Entrepreneurship, Market Creation and Imagination 4.1 Some current stakes of entrepreneurship 4.2 The entrepreneur in the history of economic thought 4.3 Motivations, responsibility and identity of the entrepreneur 4.4 Entrepreneurship and complexity: the role of the imagination Managerial Approaches and Theories of the Firm 5.1 Complexity and management: the first steps 5.2 Manager’s role versus complex systems 5.3 Marketing and complex systems 5.4 Complex systems and human resource management 5.5 Conclusion: managers’ creative responses Conclusion References Index End User License Agreement List of Table Chapter Table 4.1 Characteristics of the three types of entrepreneurs Chapter Table 5.1 The first research on management in connection with complexity (sourc Table 5.2 Connects and complementarity between RBV and complex systems (source: List of Illustrations Chapter Figure 3.1 The discontinuous growth of a chaordic system (source: van Eijnatten Chapter Figure 5.1 The four situations from the Cynefin model (source: Burger-Helmchen Figure 5.2 Four types of complex systems in marketing (source: Wollin and Perry Figure 5.3 Theoretical conceptualization of the firm and complexity (source: Co Figure 5.4 Creative organizational reactions (source: Fisher and Amabile 2011, Smart Innovation Set coordinated by Dimitri Uzunidis Volume 19 Creative Management of Complex Systems Jean-Alain Héraud Fiona Kerr Thierry Burger-Helmchen First published 2019 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address: ISTE Ltd 27–37 St George’s Road London SW19 4EU UK www.iste.co.uk John Wiley & Sons, Inc 111 River Street Hoboken, NJ 07030 USA www.wiley.com © ISTE Ltd 2019 The rights of Jean-Alain Héraud, Fiona Kerr and Thierry Burger-Helmchen to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988 Library of Congress Control Number: 2018962282 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library ISBN 978-1-84821-957-1 Preface “Everything is becoming more complicated; we must go ever faster!” This rather common statement will certainly remind readers of similar ones they have heard in the media or during a conversation There is undoubtedly a shred of truth in these popular expressions, but to rationally analyze their meaning, we must first distinguish complication from complexity In fact, the state of being complicated is different from that of complexity – the first is a linear progression even when it does not look straightforward, whereas complexity is an emergent state – novel outcomes emerge over time that were not foreseeable beforehand This concept is most interesting to consider when managing organizations, as it requires distinctive planning, managing and operating techniques Complexity is born of interactions between a multitude of actors that are possibly aware but often unaware of the fact that they belong to the same system, with the formation of feedback loops that render the system’s evolution largely unpredictable Complex systems have very specific properties, particularly the nonlinear response to stimuli that must be taken into account by the managers who are in charge of regulating or steering them Whereas an engineer can manage a complicated system (often by way of technology), it is an exaggeration to the claim that the administration of a complex organization is “managing” the system Our planet is a complex system, as is our body, the organizations that we create, or our social and economic systems Complex systems can often be analyzed as a system of systems For example, a company is a system within the sector-specific system, i.e of its partners, suppliers and clients, the institutional framework, etc It is no simple task to define the boundaries of the system being observed (or steered) as complex systems are embedded within other complex systems However, in order not to become overwhelmed we must deal with any question or specific problem by defining and determining which part of the system to investigate and at what level of scale There are also a number of methodological choices that must be made at the outset in order to better understand and act As the complexity of systems increases with the number of connected elements, the contemporary world generates a veritable explosion in complexity taking into account the digital revolution and the Internet The globalization of technology, economy and lifestyles brings not only attempts to simplify and standardize (in order to reduce complexity), but also an enormous development of complex interpersonal relationships around the planet, which renders the overall system terribly unpredictable Throughout this work, we will define complex systems with greater precision We will evaluate their adaptive qualities, reactivity to changes in the environment and their resilience We will also investigate the relationship between complexity and creativity: a complex system functions in a largely self-organized way and this can lead to the creation of novelty, emergent outcomes and unexpected properties, which is another form of creativity As one can imagine, managing a complex system requires qualities such as open-mindedness, attentiveness and imagination Those who manage and lead complex systems are acquainted with ambiguity and understand that systems (and people) can be steered but not controlled This creative management must be capable of interpreting weak signals that have a heavy bearing on the future; they must be able to adopt behavior that is “entrepreneurial” rather than “administrative” The variety of situations managers may be faced with obligates them to be creative, to use fewer fixed management rules and more incentivizing mechanisms to make the system adaptive and to encourage rather than block the system’s intelligence As such, we prefer the following expression to the one given at the start of this chapter: “Everything is becoming more complex; we must be ever more creative!” This work consists of five chapters The first chapter, written by Jean-Alain Héraud and Thierry Burger-Helmchen, presents an overview of complex systems and some motivations that managers may (must) follow while managing these particular issues This will lead us to managerial and economic considerations, for example, by revisiting classical subjects from economic theory, such as individual rationality or evolutionary processes In management, we will mention new concepts such as “exaptation”, which generalizes adaptation The second chapter, written by Jean-Alain Héraud and Fiona Kerr, focuses on one of the primary properties of complex systems: their constant evolution Complex systems not present a stationary, immutable system They are dynamic or, more precisely, evolving With the help of examples taken from the course of enterprises or more general examples, the authors will gradually outline the competencies necessary for a manager in this kind of environment: being able to think in a complex manner The third chapter, written by Fiona Kerr and Jean-Alain Héraud, is dedicated to weak signals After having defined these discrete facts that bear on the future, they will highlight the need to establish safety nets, identification and filtering devices, and the ability to interpret weak signals within organizations Complex systems have phases, points of attraction that, through self-organization or a deliberate strategy, may be identified and used The system the manager must steer may be labeled as “chaordic” – an intermediate situation between order and chaos – as there are powerful leverage points in such a system The adaptation of the system through innovation is also one of the keys to management in the longer term, hence the importance of building on the skills of actors of particular importance by translating these from new ideas outside the system: the literature mentions “door keepers”, “boundary riders” or “knowledge angels” The analysis of intercultural situations will help illustrate this problem The fourth chapter, written by Jean-Alain Héraud, analyzes the entrepreneur’s role in complex systems Sometimes the primary actor, sometimes completely absent from theoretical representations in economics (according to the school of thought), this figure is, in fact, central to the interpretation of the history of real-world systems It will become clear that a certain rereading of the history of economic thought is very elucidating when it comes to tackling today’s important issues such as the entrepreneur-innovator’s role within the company and in the entire economic system, processing uncertainty in decision-making, adapting to the market, or creating a market The human sciences also contribute useful complementary perspectives such as the role of social identities and the imagination’s place in management Finally, the fifth chapter, written by Thierry Burger-Helmchen, adopts a resolutely managerial approach He starts by presenting the overarching functions of management science that may benefit from new observations from the perspective of complex systems; next, the author focuses on two functions: strategic marketing and human resource management In these different cases, the manager has a choice between several types of action, the basis of which may be more or less improvisational and more or less adapted to the situation Jean-Alain HÉRAUD, Fiona KERR and Thierry BURGER-HELMCHEN October 2018 Introduction: Why Do We Talk About Complexity in Management? The subject of this work is the management of organizations in contexts that are characterized by strong systemic complexity We wish to show that this type of management can nevertheless be creative in the sense that it necessarily evades linear thought This way of thinking can be adapted for complicated problems, but not for complex ones In the former, the application of causal reasoning and optimization methods enables us to arrive at the correct response for a properly asked question (even though this requires a great deal of calculations) In the latter case, it is an illusory wish to establish a precise and exhaustive model of reality and risks as we would be dealing with an emergent process, and we must be content with initiating the processes and performing experiments on both means and ends The essence of life is in complexity, as shown by philosopher Edgar Morin – particularly in dialogue with economist and systemic specialist Jean-Louis Le Moigne (Le Moigne and Morin 1999) If an organization is to be considered living – i.e evolving, dialectic, partially unpredictable and thus difficult to manage according to strategic planning formulas – then it requires exploring alternative management styles and thinking outside the box, hence the introduction of the concept of creativity The subject of management is living, thus creative, which obligates management to perform in a different way Complexity and creativity are part of the research subjects that draw most of the attention towards economics and management fields These two fields of research share numerous conceptual and methodological aspects In both economics and management, complexity and creativity are also transdisciplinary vectors that require researchers and practitioners to revisit certain basic hypotheses and concepts Be it in economics and creativity management or in the application of the science of complexity, the number of academic publications, books, even special editions of entire journals in these fields, summer schools, or research centers has seen considerable growth in the last two decades Today, not only practitioners but also the political sphere and organizations (governmental and NGOs) often use the terms economics of creativity or complexity management Recent developments in these fields of research as well as the synergies in their evolution within economics and management were the main motivating factors for writing this book, which presents recent issues in economics and management To tackle the issue of complex system management, we will draw our attention towards recent manifestations in the field of economics and creativity management However, the present work does not warrant its contribution to the subject of creativity The focus here is placed on the notion of the complex system The aim is, in general, to cover a wide range of fields – as diverse as private or public organization set-up, formal or informal organizations, spanning from enterprises to urban systems Our perspective towards this system will be similar to that of the organization’s manager, attempting to provide decision-makers with theoretical representations and useful, concrete examples 1.1 Examples of complex and/or innovative projects Launching a start-up and managing an innovative project in an existing enterprise are tricky jobs that elude typical strategic planning models The description of the complex system in question is obviously not the same: managing an innovative project implies a detailed understanding of the company’s system (the stakeholders in a very broad sense, namely the internal actors and regular partners) as well as its environment, whereas the creation of a start-up implies knowing how to anticipate what may be the future multiactor system where it will establish its competence Another example is that of a megaproject such as designing and building a new nuclear center model or redeveloping an urban zone in a state of decline In the former situation, there is a strong technological innovation dimension even though this is not the only uncertainty that must be managed and the only field of creativity to be involved In the latter case, it is not a matter of technological innovation – or only marginally – but rather of an operation requiring a great deal of creativity in the most diverse domains, often an innovative way of thinking about how to articulate the collective project, and then its governance In the above-mentioned examples, the common feature concerning creativity is that it is not simply a matter of implementing a new idea with a certain functionality in mind (by rationally constructing the optimal response to the question asked), but rather steering a complex system towards a goal which is not completely defined at the onset To this, management organizes a multitude of competences and the organization uncovers a large part of the pertinent data along the way The literature on management science provides solutions on such issues in several ways The most promising solution is the entrepreneurship theory developed by Saras Sarasvathy, who popularized the effectuation approach as opposed to ordinary causal reasoning in project management (Sarasvathy 2001) Matters pertaining to general (interdisciplinary) theories describing dynamic systems and self-organized processes are also taken into account Jean-Louis Le Moigne, complex systems theoretician, is also one of the thinkers concerned with self-organization in management (Le Moigne 1994) In fact, following the works of I Prigogine in chemistry, H Atlan in biology, F Varela in cognitive science, etc., Le Moigne has applied this concept to management Stating a system is complex implies it is self-organizing With this attribute, it redefines itself over time and this creative faculty renders it unpredictable This is the profound reason that connects complexity, uncertainty and creativity, and this is why the manager of such a system has difficulties steering with tools articulating causes and consequences in a linear way We must break away from scientistic thought, at least as much in management as in other fields ... Theories of the Firm 5.1 Complexity and management: the first steps 5.2 Manager’s role versus complex systems 5.3 Marketing and complex systems 5.4 Complex systems and human resource management. .. About Complexity in Management? The subject of this work is the management of organizations in contexts that are characterized by strong systemic complexity We wish to show that this type of management. .. remaining work, we will deal with a number of facets connected to the creative management of complexity As such, Chapter deals with the evolution of complex systems and Chapter with their steerage