This follow up talk from the London School of Economics Complexity Programme focuses on the scientific foundation for management strategies during times of complex transition (i.e., collapse), and what kinds of strategies work best for different kinds of organisations under different circumstances.

1. Phase Transition Complexity strategies for change Noah Raford Massachusetts Institute of Technology London School of Economics November 18, 2009

2. Phase Transition What do you do when you are here? Noah Raford Massachusetts Institute of Technology London School of Economics November 18, 2009

3. Source: Ludwig, 2002 Source: Ludwig, 2002 1 ton Time Response

4. Source: Ludwig, 2002 Time Response

5. Source: Ludwig, 2002 1 ton

6. Source: Ludwig, 2002 1 ton

7. “ Complex adaptive systems move towards conditions of self-organised criticality.” (Bak, 1996)

9. “ The production of potentially catastrophic risks is endemic to late modern society.” (Beck, 1992)

10. Anatomy of a Credit Collapse Housing bubble (R1 and R2) and bull market (R3) Collapsed as a result of adjustable rate mortgages Coming due (B4 exacerbated by R5), growing business and consumer debt, lowering purchasing power and further depressing the stock market (R3). Source: Stroh, 2009 (www.appliedsystemsthinking.com) Endogenous shocks: Percolating systemic risk

12. Source: Tainter, 1988

13. Key message 1 Non-linear phase transitions are endemic to all classes of complex adaptive systems

14. Key message 2 We live in one

15. Climate Change Energy Supply Security STRESSES RESPONSES Physical Systems Social Systems Governance Erosion Behavioural Norms Disrupting Fragile Systems Amplifying Inequality and Grievance Source: Adapted from Rosbon, 2009

16. Increased Connectivity Increased Volatility Decreased Flexibility Formula for the 21 st Century “ Too big. Too fast. Too complex.” (Robb, 2008)

18. Question How do you prepare for and respond to radical non-linear change?

19. Short answer You can’t. Increase your adaptive capacity “ Dynamic capabilities”; mental, emotional, and social flexibility

20. Source: Holling, 1987 Cycle of adaptive change Connectedness Conservation Growth Capital Weak Strong Active Passive r K

21. Source: Holling, 1987 Cycle of adaptive change Connectedness Conservation Growth Release Capital Weak Strong Active Passive r K Ω

22. Source: Holling, 1987 Connectedness Reorganization Conservation Growth Release Capital Weak Strong Active Passive r K Ω α Cycle of adaptive change

23. Source: Holling, 1987 Cycle of adaptive change Connectedness Capital Weak Strong Active Passive Reorganization Conservation Growth Release r K Ω α

27. Key message We don’t know when, where, or at what scale transitions will occur. We need to be aware of when a change is beginning, and “learn from the future, as it emerges.” ( Scharmer, 2006)

28. Key message Your strategic imperative should be driven by where you are on the adaptive cycle, and at what scale you are operating on.

29. Question How do you know which strategy to use and when to use it?

30. Simple Complicated Complex Chaotic Disorder Source: Snowden, 2009 Cynefin

31. Simple Complicated Complex Chaotic Source: Snowden, 2009 Cynefin Disorder r K Ω α

32. Simple Problems and answers well known One or a few right answers Bureaucratic practice (SOP) Constrained action Sense – Categorise - Respond Skills: 10 hrs Chaotic Unclear what are data No answers Novel practice, crisis management Creative action Act – Sense - Respond Skills: Instinctual Complicated Problems open ended A range of possible answers Analytical, investigative practice Bounded action Sense – Analyse – Respond Skills: 1,000 hrs (6 months) Complex Problems and solutions evolving No right answers Experimental practice Lightly bounded action Probe – Sense - Respond Skills: 10,000 hrs (5 years) Cynefin, Plus Source: Snowden, Raford, 2009 ? r K Ω α

33. Simple Problems and answers well known One or a few right answers Bureaucratic practice (SOP) Constrained action Sense – Categorise - Respond Skills: 10 hrs Chaotic Unclear what are data No answers Novel practice, crisis management Creative action Act – Sense - Respond Skills: Instinctual Cynefin, Plus Source: Snowden, Raford, 2009 ? Complicated Problems open ended A range of possible answers Requires analysis and investigation Bounded action Sense – Analyse – Respond Skills: 1,000 hrs (6 months) Complex Problems and solutions evolving No right answers Experimental practice Lightly bounded action Probe – Sense - Respond Skills: 10,000 hrs (5 years) r K Ω α

34. A-S-R P-S-R A-S-R P-S-R P-S-R Cynefin, Plus Cynefin, 4D Probe – Sense - Respond Act – Sense - Respond

35. Key point Scale of transition and the scale of actor determines the context for response.

36. Photo: Menno van Tol

37. Less resources, lots of freedom Move fast Make quick decisions Uncover and create micro-opportunities Communicate and learn fast Excel in A-S-R crises and in P-S-R downtime Probe – Sense - Respond Act – Sense - Respond

40. More resources, less freedom Exploit existing opportunities Slow to mobilise Slow at making decisions Less information from their environment Poor at communication Good at A-S-R crises (C&C) but poor at P-S-R Probe – Sense - Respond Act – Sense - Respond

41. “ Strategic renewal” efforts Thompson, Ramirez, et al. (2009) Mergers and acquisitions (macro) Small, specialised units or teams Special experimental projects Workshops, forums and meetings Systemic HR practices Sources: Thompson, Ramirez, et al. (2009) Probe – Sense - Respond Act – Sense - Respond

42. Sources: Floyd & Lane, 2000; Teece, Pisano, Shuen, 1997 Role Conflict 70% Fail (Strebel, 1996) Act – Sense - Respond Source: Eisenhardt and Bourgeois, 1988

44. Poor at A-S-R crises and P-S-R efforts Most resources, most problems Most political and bureaucratic Most insulated from the environment Slowest mobilization Stabilizing effect Life support systems Probe – Sense - Respond Act – Sense - Respond

45. Policy experiments Adaptive management and monitoring Long term thinking Government as gardener “ Foresight” groups Spies and intelligence agencies Funding and support for lower level innovation Creation of resource reserves Probe – Sense - Respond Act – Sense - Respond

46. Key message Sensation, reflection, and communication are vital in times of transition and renewal. Rapid decision-making, in a context of shared understanding, combined with the authority to execute, is the key to competitive advantage in transition.

47. Implication Smaller groups exhibit greater flexibility, speed and awareness, thus have the competitive advantage over large groups during times of transition (k species).

50. “ Practice day and night until the sword becomes no-sword, the intention, no-intention.” Kendo proverb

53. 2. Reflection Constant dialogue Sense-making conversations Removing yourself from the world Facilitated workshops Creating a space for insight ‘ Profound truths’ to emerge “ A ‘clearing’, within which the self approaches itself from out of the darkness of misrecognition and into the ‘lighted space’ of recognition.” Heidegger

54. 2. Reflection Constant dialogue Sense-making conversations Removing yourself from the world Facilitated workshops Creating a space for insight ‘ Profound truths’ to emerge “ A ‘clearing’, within which the self approaches itself from out of the darkness of misrecognition and into the ‘lighted space’ of recognition.” Heidegger

55. 3. Guiding direction “ Deep source” Inspiration Shared vision Schwerpunkt / passion Discovered, not created Cannot be planned “ Releasing the ‘inherent tendency’ within a material... Uncovering the inherent possibilities of the material at a particular historical moment, as part of an inherent temporal unfolding that is largely unresponsive to the whims of the individual actor.” Adorno

56. 4. Action Bringing forth from nothing Design generation Rapid prototyping Prolific experimentation Incremental steps towards a holistic vision

57. 5. Integration Bringing back into practice Inspiring adoption Linking rewards and incentives Monitoring the results; user feedback

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