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The Dynamic Properties of Complexity andBusiness Resilience
Very few systems are static in nature. In fact, most systems encountered in Nature not only are dynamic,they are frequently non-stationary and their properties are constantly changing. The same may be said of complexity and of its bounds. As we know, complexity is a physical property of every system, just likefor example energy. At the same time, for every single physical system, in addition to a value of complexity, it is possible to measure the correspondinglower and upper bounds of complexity. Thesebounds depend on the system's structure, the way information flows within it and on the intensity of thisflow. The upper complexity bound is particularly interesting and it is known ascritical complexity.Systems which function in the proximity of their critical complexities aredominated by uncertainty(chaos), their structure is weak and may easily behave in an unexpected manner. In the vicinity of thelower bound of complexity systems are more stable and predictable. Therefore, it is not a good idea tofunction close to one's critical complexity. It's like having a level of cholesterol which is close to thevalue suggested by your doctor.Based on how close a system functions to its critical complexity one may infer its "state of health" orresilience. Resilience is of great importance since it reflects the system's ability to maintain functionalityin the presence of sudden and unexpected events (shocks). Our turbulent economy will be characterizedby and increasing number of shocks of growing intensity. This is because it is highly interconnected and,at the same time, fragile.When it comes to selecting a strategy, making a decision or operating any kind of choice, intuitionsuggests that with all things being equal, the less complex option is better. However, it is
true that alower value of complexity is always better. This is because complexity - which is measured in bits - notonly quantifies the amount of structured information within a system, it also reflects a system's"potential" to accomplish various functions, to evolve and survive. In a biological sense, the fitness of asystem is proportional to its complexity. This is why evolution pushes living organisms towards states of higher complexity.So, is it better to be more or less complex? Like everything in life, also complexity is relative. It is theexistence of critical complexity that helps us answer the question. In fact, it is only when we confrontthe complexity of a system with its critical complexity can we state if it is indeed highly complex or not.The mere value of complexity is meaningless until the corresponding critical complexity is specified.There are three main types of scenarios which we will illustrate. These correspond to situations in whichcritical complexity:1. remains constant2. decreases3. increasesLet us analyze a corporation. In general, a growing and evolving business becomes more complex. Thethree types of scenarios are illustrated below.