What is complex? What is simple?

To understand what is complex, it is helpful to first define the term complicated. A motor or a mathematical equation can be complicated. We do not immediately recognize how the motor works or – if it is defective – why it does not work. Similarly, we cannot easily solve the result of a mathematical equation. It is complicated (not complex!). However, the way the engine works and the result of the equation are clear. If you press the accelerator pedal, the engine accelerates. The mathematical equation always leads to the same result under all circumstances.

Complex systems do not behave like this. Their behavior can be surprising. Small interventions can have devastating consequences. Complex systems are systems with many elements, usually of different types, which interact. To make matters worse, not all factors that influence the function of a complex system are known. Complex systems are, for example, nature with its animals and plants. Human intervention can be well-intentioned, but can lead to unforeseeable consequences and the extinction of a species. Our market economy is also a complex system in which countless market participants are constantly making decisions and creating dynamics. Some companies succeed, others die. Here too, interventions (by governments) are often delicate and have unexpected outcomes. Hence the advice: Only admire a functioning complex system, don’t touch it!

A simple system, on the other hand, is a system that consists of just a few elements and relationships. It is transparent and its mode of operation is easily recognizable. Interventions are more likely to lead to the desired effects.

However, a simple system must not be too simple, as this would also limit its functionality. An extremely simple system does not need management. A system must be sufficiently complex to provide necessary and vital functions. It must be able to evolve and cope with environmental influences, possibly using them to its advantage. It needs a certain degree of variance and must still be controllable at the same time.

Management and complexity

What is management? Management is the transformation of resources into results.

This definition expresses that it is about effectiveness. It is not about working a lot and “hard”. In organizations of all kinds, we transform human labor, capital and – today in particular – knowledge into results. These results consist primarily of providing a certain service for the customer, developing a new product or simply being productive or profitable.

Dealing with complexity is the biggest challenge for managers in today’s rapidly changing world and extremely volatile markets. Management today is more than ever about dealing with uncertainty, about making decisions under extreme lack of information.

Everything that our organizations produce, whether intentionally or unintentionally, is the result of our actions and decisions. And the complexity that we have to deal with in most cases ensures that things often turn out differently than planned. We can compare the manager to a rider who has to control his horse (his company, his department), which is much bigger and stronger than himself. And this horse not only has to go in the direction he has set, but also overcome obstacles and other adversities.