sca packaging 1 presentation/date/initials why complexity science is so important to business today...

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“Why Complexity Science Is So Important to Business Today and Why It Is So Difficult to Get this Message Across”

Potentials of Complexity Science for Business, Government and the Media

August 3 – 5, 2006

Budapest

Richard L. Sanders

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Business Is Changing Rapidly

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What Is Contributing to this Change?

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Present Business Paradigm

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“Always Change a Winning Team”

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There Is Hope: the “Calvary” Is on the Way

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A man was walking home one dark and foggy night. As he groped his way through the murk

he nearly tripped over someone crawling around by a lamp post. "What are you doing?" asked the traveler. "I’m looking for my keys."

Replied the other. "Are you sure you lost them here?" asked the first man. "I’m not sure at

all," came the reply, "but if I haven’t lost them near this lamp I don’t stand a chance of

finding them."

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Until recently science has been restricted to the illuminated area, but the advent of

computers and the internet has made it possible to explore the shadows and further.

A new light is being switched on that is resulting in a paradigm shift that can facilitate

future growth and prosperity.

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Stages of an Enterprise This picture and those marked by “MT” used with the permission of the MT Taylor Corporation

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System

A system is a set of dynamic, interacting elements, organized for a goal.

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Closed System

A closed system is one that is isolated from its environment. This kind of system uses its own internal reserve of potential energy, and

as reactions take place, entropy rises irreversibly to a maximum. Thermodynamic

equilibrium is reached, and the system can no longer produce work.

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Open System

An open system is one in permanent interaction with its environment, with which it exchanges energy, matter and

information. Because of the energy flow through the system and the dumping of “used” energy into the environment, its entropy is maintained at a relatively low level. This system is

capable of performing work.

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Complex System

Large variety of elements. Elements organized in hierarchical levels. A high concentration of connections between the

elements. The interactions between the elements are nonlinear.

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Positive Feedback

Positive feedback loops contain the dynamics for change in a system, growth and evolution.

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Positive Feedback

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Example

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Negative Feedback

Negative feedback loops represent control and stability, the establishment of equilibrium

and self-maintenance.

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Negative Feedback

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Example

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Combination of Positive and Negative Feedback

This is commonly occurring behaviour, rapid growth followed by stabilisation

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Combination of Positive and Negative

Feedback

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Example

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The Dynamics of Maintenance and Change

The properties and behaviour of a complex system are determined by its internal

organisation and its relationship with its environment.

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The Dynamics of Maintenance and Change (Continued)

Every system has two fundamental modes of existence and behaviour: maintenance and change. The first,

based on negative feedback loops, is characterised by stability. The second, based on positive feedback loops, is characterised by growth (or decline). The coexistence of the two modes is at the heart of a

complex system

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Homeostasis: Resistance to change

Formally: The ability or tendency of an organism or cell to maintain internal

equilibrium by adjusting its physiological processes.

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Homeostasis: Resistance to change

Informally: A homeostatic system (an industrial firm) is an open system that maintains its structure and

functions by means of a multiplicity of dynamic steady states rigorously controlled by interdependent

regulation mechanisms. Such a system reacts to random changes in the environment to maintain

stability.

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Evolution

For a complex system, to endure is not enough; it must adapt itself to time dependent

changes in the environment and evolve. Otherwise outside forces can disorganise and ultimately destroy it. A key to unlocking this apparent paradox can be found in diversity.

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Natural Selection

Occurs by random mutation

Much too slow to explain speed of evolution

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Sharing of DNA

Gene pool required: (the richer, the better)

Sharing of genes: (sharing ideas, resources, etc.)

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Homeostasis vs. Evolution

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Diversity

The law of requisite variety from Ross Ashby (1956) states that the regulation of a system is efficient when it depends

on a system of controls as complex as the system itself. Variety permits a wider range of response to potential

forms of aggression. Variety also produces the unexpected, which is the seed of change.

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Auto Catalytic Behaviour

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Reactions (e.g. Chemical)MT

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Reactions

Without catalysis: (A + B = AB)

With catalysis: (A + B + C = AB + C)

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Auto catalysis TM

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Auto catalysis

Catalysis BA: A + B + BA = AB + BA

Catalysis AB: A + B + AB = BA + AB

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Under certain conditions this auto catalytic process can lead to exponential growth, for

instance the exponential growth of the compound AB.

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Emergence of Auto catalysis TM

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Four Zones of Auto catalysis TM

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Four Zones

Zone 1: much diversity but little interaction.

Zone 2: a lot of interaction but little diversity.

Zone 3: too little diversity and interaction.

Zone 4: the right balance.

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Connectivity

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Boolean Networks TM

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Three Modes of Behavior

Chaos: too much connectivity (random changes can cause avalanches of change; positive feedback)

Order: too little connectivity (random changes are damped and system returns quickly to ordered state; negative feedback)

Edge of Chaos: right balance between positive and negative feedback leading to adaptation of the network

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Two Necessary Conditions for Evolution

“Right” level of diversity.

“Right” level of connectivity.

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Interlude

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The New Paradigm

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DC3?

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F16?

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What Kind of Company Do You Want?

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Complexity Science and Business

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Stages of an Enterprise This picture and those marked by “MT” used with the permission of the MT Taylor Corporation

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Conclusion