Tuesday, December 15, 2009

The first strategic task: define the problem

Ron Ashkenas:

A senior manager at Cisco once suggested to me that there are two types of challenges in organizations — capacity problems and complexity problems. Capacity problems are those that require more, fewer or different resources. Complexity problems require new thinking and a creative approach.

For example, increasing market share for your product can often be addressed through additional sales people, or more promotion. It's a question of how many resources to throw at the problem. On the other hand, if the market is changing and different competitors are entering with new value propositions, then throwing more resources at the problem probably won't work

Ashkenas contrasts capacity and complexity. It seems to me that this distinction is similar to the difference Peter Senge sees between detail and dynamic compexity.

The answer lies in the same reason that sophisticated tools of forecasting and business analysis, as well as elegant strategic plans, usually fail to produce dramatic breakthroughs in managing a business. They are all designed to handle the sort of complexity in which there are many variables: detail complexity. But there are two types of complexity. The second type is dynamic complexity, situations where cause and effect are subtle, and where the effects over time of interventions are not obvious. Conventional forecasting, planning, and analysis methods are not equipped to deal with dynamic complexity. Mixing many ingredients in a stew involves detail complexity, as does following a complex set of instructions to assemble a machine, or taking inventory in a discount retail store. But none of these situations is especially complex dynamically.

One could argue that the modern corporation is designed to handle capacity problems/detail complexity and that they do it very well. Dynamic complexity (Ashkenas's "complexity problems") present a completely new set of challenges. I discussed aspects of the challenge here:

Why corporate change is hard and failure almost inevitable

Why corporate change is hard and failure almost inevitable (II)

Why corporate change is hard and failure almost inevitable (III)

UPDATE: Peter Osborne has some thoughts here.

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