Musings on Entrepreneurship and Innovation
Monday, May 10, 2004Simple Rules of Business?
This past weekend, I had the pleasure of meeting Scott Camazine, MD, PhD at a retreat at the Ucross Foundation that featured Scott and others associated with the Plexus Institute. Over the last decade or so, Scott and his biology colleagues have studied how complex structures, patterns, and behaviors can emerge spontaneously from the interactions of individual agents when such interactions are guided by a simple set of rules. It's important to note that Scott has been critical of the adoption of pseudo-science in the realm of social science that purports to be based on complexity ideas developed in the biological and physical sciences. After all, human beings aren't "like" genes, grains of sand, or bees in many important ways. That said, Scott seems to be coming around to the belief that complexity science may have something to say regarding the behavior that emerges from the interactions of any nodes in a networked system.
In this exploratory context, Scott and I spoke a bit about the conditions that might support modular business architectures. At least within the very long timeframes of biological evolution, adaptation seems to favor the flexibility of modularity; that is, if local rules of behavior between "nodes" (e.g., termites within a colony) can be made simple while still allowing the emergence of adaptively complex behaviors and structures. After all, modularity creates options, which are valuable in a changing environment. As I understand it, natural selection helps develop local rules of behavior - the interface, if you will - between networked nodes that are as simple as possible, but no simpler. After all, unnecessarily complex interfaces or rules create a form of overhead.
Businesses don't evolve - at least not in the same sense, or over the same timescales, as natural selection. Businesses are human systems that are designed. However, I do believe that businesses are under constant pressure to adapt to a changing environment. When communication and coordination costs are high, the environment isn't changing very rapidly, and the task at hand is complicated rather than complex, hierarchy and centralization can make sense. On the other hand, the appropriate organizational design response to an increase in environmental complexity and a decrease in communication and coordination costs isn't necessarily to develop an increasingly elaborate business bureaucracy. As recent business, economic, and technology writers have noted, a simpler, more modular business design may be more adaptive.
But, as many have noted, the existence of ubiquitous, low cost communications networks may be a necessary condition, but aren't sufficient. The interfaces between "modules" has to be well-defined and understood, which means that simplicity is a plus.
I draw three tentative conclusions from this little brainstorm. First, robust strategies to complex business challenges may well be found by paying close attention to the rules of interaction between individuals and business units. Second, it's likely to be extraordinarily difficult to tease out or design the most robust set of rules of engagement. I suspect, though, that computer-based simulation (agent based and system dynamics tools come to mind) might be useful in the process. Third, the more democratic organizational examples raised by Tom Malone in his latest book may well be useful places to start our explorations.
