How many four-digit numbers are there such that the thousands digit is equal to the sum of the other three digits?
How many linear meters of bricks will I need to cover that wall?
How many customers have we received feedback from?
Being complicated indicates that it may be hard and take several steps to find the solution, but eventually we will have a definitive, stable, and predictable response. Generally, something complicated can be solved by an industrial machine. The automation of a car assembly plant is a complicated problem. Something complex, on the other hand, requires a different thought process and involves different areas of the brain.
These are characteristics of genuinely complex problems:
There is no 100 percent correct solution to the problem; there are simply different perceptions of what could be the most appropriate solution.
The situation may have elements that are illogical or not fully understood despite our best efforts to analyze and rationalize these elements.
There are multiple people involved with different expectations and points of view, which often seem irreconcilable.
There is a high human factor influenced by social or cultural conditions.
The environment on which the situation is centered is politically charged.
Resistance is different because the problem involves varying aspects, many of which carry emotional repercussions.
Imagine I leave you in a room with a whiteboard for solving an equation. Sooner or later, you’ll be able to solve it and find a logical and definitive solution. This will activate an intrinsic reward system in your brain that will generate satisfaction and keep you fully motivated.
Now imagine that I leave you in the same room with three of my nephews and two of their friends, all between six and eleven years of age (and forgetting to mention that the latter are the worst behaved at school). I ask that within the next three hours you implement a strategy that will control their behavior, and that this strategy should be predictable and replicable on future occasions. The challenge is much greater here!
The first challenge requires linear thinking (if A = B and B = C then A = C) and has a consistent relationship between cause and effect (complicated). For the second challenge, the relationship is neither clear nor linear, and neither are cause and effect (complex). With linear and rational thinking (complicated), we have a definitive solution. However, in a complex situation, there isn’t a single solution, but rather several suggested recommendations.
Which of these cases most resembles the problems at your company?
Imagine you are part of the Stradivari family and want to build Stradivarius violins. The challenge would require that you have the proper knowledge and coordinate the necessary people. The creation of this product presents a lot of variability, because it involves specialized, constantly interacting people and manual, ever-changing work. Any alteration of the chain (value stream) would lead to unpredictable results that are complex to solve. If we add that each new violin must include innovative features, working times would increase exponentially because of an increase in the complexity of human interactions.
FIGURE 2.3: Business value creation differentiator
If we used a machine instead of crafting the violin manually, the differentiator in business value would be mainly industrial equipment. The better the machinery, the faster you can produce your product. If there’s a problem, it would probably suffice to change gear or standardize the processes to resolve it. If machine failure were predictable, you could calculate the exact number of violins you would lose that month and alert your customers. Here, the cause and effect are clear and consistent, and a solution to the problem can be reasoned by linear thinking. But as of 1995, three factors began to alter this scenario:
The ability of any company to approach global markets.
Acceleration due to the Internet and artificial intelligence.
The need to be highly creative and to have a differentiated product.
Nowadays, much of a company’s success consists of creating plans that can grow exponentially with innovative products, putting a high number of minds to work together, looking for creative solutions, and connecting an idea with a previously nonexistent market. This is clearly something complex.
Part of the solution is to actively involve the individuals with the problem, turning them into cocreators of the solution (customers, business partners, etc.). Help them think differently and encourage them to solve the matter as a complex problem instead of a complicated problem.
Trying to solve something complex with rules for what’s complicated only aggravates the problem and makes the solution appallingly tangled when it’s struck by reality.
The Trap of Tools in a Complex World
Imagine a group of people who lack good communication and trust but who could become an unstoppable team by changing their interactions. If you were to install a software application for them to communicate better, this would only exacerbate the problem and increase conflict. There would also be a rise in bureaucracy, because it would require the installation of the new software, account and password management, and an increase in time sitting in front of a computer to cooperate—which would unavoidably diminish face-to-face communication.
This type of action is very common and may be well-intentioned, but it’s particularly dangerous if the company doesn’t realize that social problems (complex) aren’t solved with IT tools (complicated) or new methodologies.
Parties involved in complex problems often suffer from shortsightedness. As the saying goes, “When all you have at hand is a hammer, everything around you will look like a nail.”
Remember that there are important benefits when company executives understand the difference between the complicated and the complex. When this happens, they usually begin to see things through a different lens.
The Illusion of Change
A few years ago, I helped with the Agile transformation of one of the largest airlines. To offer new routes under a unified brand, they had bought out another company from a neighboring country. The change seemed simple. The planes would be painted with the new logo, employees would be sent on training programs, processes would be standardized, new publicity would be rolled out, and new uniforms would be made available. Within a few months, everything would be ready for the new start. But in reality it took years and faced much resistance, because the employees of the acquired company thought of their brand as part of their own culture and country.
This provoked a politically charged, hostile environment where people chose sides instead of becoming business partners working toward a common goal. It took years to establish a healthy environment and center employees’ focus on the business value again.
When companies simplify or try to solve a complex problem as if it were complicated, employing linear thinking, they end up resorting to what I call the simple loop decision process. This response is derived from a reasoning style inherited from the industrial era. Our education is based on a time that no longer exists, and we’re trying to adapt the reality of our organization to an obsolete toolbox.
When I started programming back in 1987, a unique version of programming applications hit the market every one to two years. In 1997, Microsoft offered an update for its operating system every six months. With such long time spans between updates, we could still employ linear or traditional thinking. Today, you and I update mobile phone applications several times a week, making it difficult to use traditional techniques. Leaders are constantly confronted with challenges of exponential acceleration, and these challenges are different from those that their predecessors faced.
Most of the people I help have never been trained to plan for changes in highly complex and uncertain environments. They feel comfortable breaking problems down and solving them sequentially, but this only results in a simple loop decision.
FIGURE 2.4: The simple loop decision process
Don’t get me wrong, linear thinking works perfectly fine for certain scenarios, but we’re entering a moment in history when focus must be placed on changing the way we reason, our habits, and how we validate our conclusions. The important thing is not to solve problems analytically and procedurally, or to follow strict steps, but to use different types of intelligence to achieve our goals. The simple loop is an almost automatic solution that goes unnoticed by many. It’s healthy to make it visible to start examining the foundations of the organization.
These are the intrinsic steps that we take when using the simple loop decision process in a company:
Executives get support for the change. Support is strengthened by negotiating and convincing other executives that the proposed solution is best.
Decision. A plan is decided on; one which will usually affect people uninvolved in the decision.
Communication and alignment. The change is shared with the rest of the company and tacit alignment is sought.
Implementation. The original plan is implemented.
Measurement and reward. The plan is measured and adjusted, and explicit reward is offered to those who met set objectives.
This cycle can be repeated in different ways. When we have the results (measurement and reward), a new decision is made, communicated, and implemented. And so the cycle continues. Sometimes specific departments push the change plan. On other occasions, leaders do. But in any case, communication flows from top to bottom with a strong goal of alignment.
The people issuing direct orders or communications are often not the most appropriate for conveying a message. The purpose of the simple loop is to ensure the implementation of the change by means of measures that specify whether the results have been aligned with initial expectations.
Explicit rewards (a “carrot”: money, higher position, etc.) are common for motivating individuals. If there’s a discrepancy between the original plan and reality, new measures, rules, or processes to reinforce the path are added. The plan will be considered successful and the transformation complete when metrics reflect the expected values.
Simple loop decisions originate from an incorrect premise, one that ignores emotions, collective intelligence, social patterns, and how the brain reacts in the face of change. Processes and structures resulting from a simple loop decision do not create sustainable behavior over time. Even if there were a peak of positive reaction at the start of the implemented plan, it will usually be followed by a lack of interest or low adoption. There is no real change unless mindsets and habits are altered. This has much to do with how conflict is faced and how the mind resists change.
The Non-linear Cause-Effect Relationship of an Action
Many companies build trust with their employees through personal conversations, creating programs that support their work and goals, and through consistent, visible forms of communication. This mutual trust can last for months or decades, but one day a small error or misunderstanding can erode the work built over many years.
In traditional management, a problem is usually approached with a “big plans = big changes = big impact” mentality, but in a complex system, such a large-scale intervention might have the opposite effect. A minuscule modification could encourage positive behaviors and lead to exponential effects. The person who made the mistake could apologize, honestly and in person to those affected, and the company could hold a session that answers the question “How are we better, and what has Mr. X’s situation helped us learn?”
I was a client of a British bank that had a high rate of credit and debit card fraud, much of it related to the theft of credit card numbers from people’s mailboxes. The company could have developed an extensive strategy to improve the situation with complex processes such as checkpoints and constant measurements to determine whether the intended objective was met. But the bank decided to alter only one habit (or micro-habit). The bank would send envelopes containing bank cards using images or logos that weren’t associated with the bank. The employees just needed to take envelopes from a different place.
This resulted in a noticeable reduction in fraud, with minimal effort and without having to change existing processes. Altering a small habit can alter the direction of the entire company and restore confidence.
In another example, employees of a software-development firm received an order that only a maximum number of high-severity software defects would be tolerated. From three hundred errors per month, the teams reduced this to fewer than fifteen. It certainly looked like a big achievement!
The change was established in a short time, which seemed like great progress for the company. But through an informal agreement, the team had started cataloguing high-severity defects as medium or low, thereby giving the impression that the change was a success. Obviously, the solution didn´t solve anything. It merely tricked the system and was probably the result of having used the simple loop decision process for years.
You know now that the cause–effect relationship isn’t always linear. I will share more on this in Chapter 4.
From a Bird’s Eye View to Low-Level Flight
Analyzing a complex problem as though it were complicated can be a useful technique to provide parties with a bird’s eye view of the situation. This provides general insight and teaches you more about the beliefs and initial thought patterns of the parties involved. For example, imagine addressing a meeting with the following beliefs:
The SAP department always completes its work on time, but other development teams delay the final solution. We should make a contingency plan and increase control over the teams. Let’s recruit three new bosses.
OR
Employees can’t do their jobs, and they require more training. We should communicate this and develop new training strategies. Let’s call in all the learning providers and begin in two weeks. In three months, all employees will be aligned.
Both ways of thinking exhibit traditional cause–effect linear patterns of an action. Here, a great change is addressed with a specific plan requiring coordination and control. What would happen if the SAP and development teams sat in the same area, worked in pairs, or self-organized with respect to their goals? Which micro-habits would be easier to change and return the greatest positive result?
Seeing a complex problem as complicated makes it possible for a group of people to channel initial conversations and create working agreements before analyzing the situation as complex. It also allows the observation of individual tendencies and understanding of the “lens” they should use to see the world.
In a typical episode of the TV series Undercover Boss, the owner of a company visits one of its branches as if he were an employee. Initially, he has a simplified understanding of the problems the branch is facing and an idea of the actions he’d take to solve the problems (complicated). But once in contact with the reality, the boss realizes that the problem is different (complex) and that it requires different information and skills to improve the situation.
Before proposing a solution, temporarily abandon your role and invest time to work in pairs with those who are actually facing the problem or require the change. Take time to absorb information, collaborate, and help. At this stage, do not judge the individuals or processes. Be part of the team, foster curiosity, talk, and question as much as you can.
In his election campaign, Donald Trump said he had a plan to improve the American health system, and that it was simple. Once he became president, after analyzing the problem with several officials, he announced that the health-system matter was an extremely complex problem.
The first step in creating a successful business is to determine whether you will require techniques to solve a complex or complicated problem. You have to gather firsthand information, talk without prejudice to several parties, change hats, spend time working with the individuals facing the
problem, make the situation visible, and be aware of existing social patterns.
A good exercise is to write down the assumptions, values, and beliefs you had before initial contact with the team members. Identify patterns and explore your own reasoning process, because this often goes unnoticed and expresses itself in automatic responses. If you’re comfortable, make the process visual and share it with those around you. If you’d rather not share it, analyze why, and you might find that you need to include something else in your personal-improvement plan. Remember that once you share something, you begin to use collaborative intelligence, which includes learning to manage feedback.
Pay close attention to changes in expectations when people discover that an apparently complicated problem is complex. Observe how they act in the new scenario. Who is still trying to use linear reasoning to solve the problem? Who is starting to look at the situation from a different point of view?
From the Good Idea to the Change Plan
In 1884 in London, Thomas Parker built the first electric car to be produced on a large scale. The vehicle was a popular method of transportation in the late 1800s because of its comfort and ease of operation, unmatched by gasoline cars of the time. Yet despite this early appearance of electric cars, we will only start using hybrids on a massive scale around 2022, and only in some countries, with the general public forced to continue to wait for electric cars to become more viable.
Leading Exponential Change Page 6
