Complexity theory and organizations, also called complexity strategy or complex adaptive organizations, is the use of the study of complexity systems in the field of

strategic management In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of Resource management, resour ...

and organizational studies. It draws from research in the natural sciences that examines uncertainty and non-linearity. Complexity theory emphasizes interactions and the accompanying

feedback Feedback occurs when outputs of a system are routed back as inputs as part of a chain of cause-and-effect that forms a circuit or loop. The system can then be said to ''feed back'' into itself. The notion of cause-and-effect has to be handled ...

loops that constantly change systems. While it proposes that systems are unpredictable, they are also constrained by order-generating rules. Complexity theory has been used in the fields of

and organizational studies. Application areas include understanding how organizations or firms adapt to their environments and how they cope with conditions of uncertainty. Organizations have complex structures in that they are dynamic networks of interactions, and their relationships are not aggregations of the individual static entities. They are adaptive; in that, the individual and

collective behavior The expression collective behavior was first used by Franklin Henry Giddings and employed later by Robert Park and Ernest Burgess, Herbert Blumer, Ralph H. Turner and Lewis Killian, and Neil Smelser to refer to social processes and events w ...

mutate and self-organize corresponding to a change-initiating micro-event or collection of events.

Key concepts

Complex adaptive systems

Organizations can be treated as complex adaptive systems (CAS) as they exhibit fundamental CAS principles like self-organization,

complexity Complexity characterises the behaviour of a system or model whose components interaction, interact in multiple ways and follow local rules, leading to nonlinearity, randomness, collective dynamics, hierarchy, and emergence. The term is generall ...

emergence In philosophy, systems theory, science, and art, emergence occurs when an entity is observed to have properties its parts do not have on their own, properties or behaviors that emerge only when the parts interact in a wider whole. Emergence ...

, interdependence, space of possibilities, co-evolution, chaos, and self-similarity. CAS are contrasted with ordered and

chaotic systems Chaos theory is an interdisciplinary area of scientific study and branch of mathematics focused on underlying patterns and deterministic laws of dynamical systems that are highly sensitive to initial conditions, and were once thought to have ...

by the relationship that exists between the system and the agents which act within it. In an ordered system the level of constraint means that all agent behavior is limited to the rules of the system. In a chaotic system, the agents are unconstrained and susceptible to statistical and other analyses. In a CAS, the system and the agents co-evolve; the system lightly constrains agent behavior, but the agents modify the system by their interaction with it. This

self-organizing Self-organization, also called spontaneous order in the social sciences, is a process where some form of overall order arises from local interactions between parts of an initially disordered system. The process can be spontaneous when suff ...

nature is an important characteristic of CAS; and its ability to learn to adapt, differentiate it from other self-organizing systems. Organizational environments can be viewed as complex adaptive systems where

coevolution In biology, coevolution occurs when two or more species reciprocally affect each other's evolution through the process of natural selection. The term sometimes is used for two traits in the same species affecting each other's evolution, as well ...

generally occurs near the

edge of chaos The edge of chaos is a transition space between order and disorder that is hypothesized to exist within a wide variety of systems. This transition zone is a region of bounded instability that engenders a constant dynamic interplay between order ...

, and it should maintain a balance between flexibility and stability to avoid organizational failure. As a response to coping with turbulent environments; businesses bring out

flexibility Stiffness is the extent to which an object resists deformation in response to an applied force. The complementary concept is flexibility or pliability: the more flexible an object is, the less stiff it is. Calculations The stiffness, k, of a bo ...

creativity Creativity is a phenomenon whereby something new and valuable is formed. The created item may be intangible (such as an idea, a scientific theory, a musical composition, or a joke) or a physical object (such as an invention, a printed literary w ...

agility Agility or nimbleness is an ability to change the body's list of human positions, position quickly and requires the integration of isolated movement skills using a combination of balance (ability), balance, coordination (physiology), coordination ...

, and

innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entity ...

near the edge of chaos; provided the organizational structure has sufficient

decentralized Decentralization or decentralisation is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group. Conce ...

, non-hierarchical network structures.

Implications for organizational management

CAS approaches to strategy seek to understand the nature of system constraints and agent interaction and generally takes an evolutionary or naturalistic approach to strategy. Some research integrates

computer simulation and organizational studies Computer simulation is a prominent method in organizational studies and strategic management. While there are many uses for computer simulation (including the development of engineering systems inside high-technology firms), most academics in the fi ...

Complexity theory and knowledge management

Complexity theory also relates to

knowledge management Knowledge management (KM) is the collection of methods relating to creating, sharing, using and managing the knowledge and information of an organization. It refers to a multidisciplinary approach to achieve organisational objectives by making ...

(KM) and

organizational learning Organizational learning is the process of creating, retaining, and transferring knowledge within an organization. An organization improves over time as it gains experience. From this experience, it is able to create knowledge. This knowledge is bro ...

(OL). "Complex systems are, by any other definition, learning organizations." Complexity Theory, KM, and OL are all complementary and co-dependent. “KM and OL each lack a theory of how cognition happens in human social systems – complexity theory offers this missing piece”.

Complexity theory and project management

Complexity theory is also being used to better understand new ways of doing

project management Project management is the process of leading the work of a team to achieve all project goals within the given constraints. This information is usually described in project documentation, created at the beginning of the development process. Th ...

, as traditional models have been found lacking to current challenges. This approaches advocates forming a "culture of trust" that "welcomes outsiders, embraces new ideas, and promotes cooperation."

Recommendations for managers

Complexity Theory implies approaches that focus on flatter, more flexible organizations, rather than top-down, command-and-control styles of management.

Additional examples

A typical example for an organization behaving as CAS is Wikipedia – collaborated and managed by a loosely organized management structure, composed of a complex mix of human–computer interactions. By managing behavior, and not only mere content, Wikipedia uses simple rules to produce a complex, evolving knowledge base which has largely replaced older sources in popular use. Other examples include the complex global macroeconomic network within a country or group of countries;

stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...

and complex web of

cross-border Borders are usually defined as geographical boundaries, imposed either by features such as oceans and terrain, or by political entities such as governments, sovereign states, federated states, and other subnational entities. Political borders ca ...

holding companies A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself. Its purpose is to own shares of other companies ...

; manufacturing businesses; and any human social group-based endeavor in a particular

ideology An ideology is a set of beliefs or philosophies attributed to a person or group of persons, especially those held for reasons that are not purely epistemic, in which "practical elements are as prominent as theoretical ones." Formerly applied pri ...

and social system such as

political parties A political party is an organization that coordinates candidates to compete in a particular country's elections. It is common for the members of a party to hold similar ideas about politics, and parties may promote specific ideological or pol ...

communities A community is a Level of analysis, social unit (a group of living things) with commonality such as place (geography), place, Norm (social), norms, religion, values, Convention (norm), customs, or Identity (social science), identity. Communiti ...

, geopolitical organizations, and terrorist networks of both hierarchical and leaderless nature. This new macro level state may create difficulty for an observer in explaining and describing the collective behavior in terms of its constituent parts, as a result of the complex dynamic networks of interactions, outlined earlier.

References

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Complexity Demystified: A Guide for Practitioners
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