Complexity Analysis
Introduction
This integrated essay focuses on explaining and discussing how small changes in a given system can result to large and radical transformational changes in an organization within the framework of complexity theory. The paper offers a description of the complexity theory, an analysis, explanation and discussion, the conclusions, extending the discussion, and the references.
Description of Theories/ Core Concepts The complexity theory is a framework that focuses on analyzing the nonlinear dynamics of systems. It is a loose assortment of concepts and analytic tools that seek to analyze complex and dynamic systems (Litaker, Tomolo, Libaratore, Stange & Aron, 2006). The complexity theory suggests that simple deterministic actions can cause highly complex and unpredictable behaviors, as well as, exhibit order and patterns. The theory seeks to explain how systems learn and spontaneously organize themselves into structured and sophisticated forms that respond better to their environments. Although the complexity theory was created in the biological and physical sciences, numerous scholars have noted that economic and social systems also exhibit nonlinear relationships and complex interactions. Economists and social scientists have noted the significance of complexity theory by observing the level of interrelationships among components of the social system (Koen, 2005). For instance, in the business setting, economists have noted that business success or failure is a product of the complex interaction between the firm and the evolving environment. It does not entail simple and linear cause-effect relationships. Levy (2000) has described the complexity theory as an umbrella concept that integrates both the chaos and networks theory. The chaos theory analyzes how recursive application of nonlinear functions gives rise to random behaviors and delicate patterns. A significant achievement of the chaos theory is its ability to display how a simple assortment of deterministic relationships can create patterned yet unpredictable outcomes (Marcol, 2005). For instance, the tossing of a coin will not guarantee exact outcomes but the outcomes adhere to specific states of nature and create patterns. The network theory analyzes the properties of networks of node where each node is a product of its connection to other nodes. A significant achievement of the network theory is its ability to explain how interrelationships and interactions among components influence the structure of the system and the components themselves. According to the theory, nodes are homeostatic entities that can adjust to changes in the environment (Levy, 2000). A change in one of the nodes causes a chain of reactions that alters other components, as well as, the structure of the entire system. Related to the application of the chaos and network theory, is the fitness landscapes model. This model examines how organizations evolve across their industry landscape in order to increases their fitness and ability to survive. This concept of co-evolution is also borrowed from the biological sciences. Organizations tend to search for higher peaks by enhance their fitness and responding to external events. These trends lead to domination of industry landscape by a few players.
Analysis/ Explanation/ Discussion Traditional models of strategy suggest that small changes in organizational or industry parameters results in small changes in the equilibrium outcome. The complexity theory challenges this conclusion. In most instances, small actions lead to significant changes in within the system as the network theory explains. Plowman, Baker, Bek, Kulkarni, Solansky, and Travis (2007), in their study, examined how a small decision that entailed offering breakfast to homeless people resulted in radical changes to a church and its environment. The radical changes were unintended and occurred gradually. The study showed that the changes were reinforced by destabilizing conditions and subsequent actions. The dynamic interactions between the initial small action, contextual conditions, and amplifying actions gave rise to a continual process of radical change. The system theory has a significant implication on the field of business leadership and management. The theory encourages leaders to take small actions that will lead to transformational changes within the organization. According to the complexity theory, business entities operate in a complex system that comprise of many interacting agents. Each agent acts according to local rules and knowledge and adapt to feedback (Levy, 2000). Industry evolves as a result of the interaction among companies, financial institutions, consumers, labor, government, and other elements of the environment. For instance, a company human resource practices may be influenced by existing labor laws, pressure from labor unions, human resource practices of other companies, and consciousness of consumers towards how companies’ treat their employees. In this case, the structure of the industry influences the behaviors of firm. Similarly, the behaviors of a given firm can influence the structure of the industry. For instance, other firms, consumers, labor union, and government agencies may call for the adoption of certain human resource practices following the successful implementation of these practices by one of the firms. There are several real examples that demonstrate how a small change leads to transformational changes in the system. The history of the automobile industry demonstrates how complex interaction between organizations and their environment can affect the structure of a given industry. In the early periods of the automobile industry, firms came up with a multiplicity of technologies including steam, electric and internal combustion engines (Levy, 2000). However, the population selection process led to the emergent of a dominant technology. The selection process was reinforced by a feedback mechanism from customers and other entities that preferred the internal combustion engines. In the 21st century, phenomenon such as global warming and scarcity of fossil fuel appear to give impetus to other engine technologies and may lead to a decline of the internal combustion engines. The 2008 financial crisis also provide evidence on how small actions can lead to large transformational changes. The 2008 economic turmoil has its origin in the United States housing industry (Cooper, 2011). During this period, real estate businesses participated in irresponsible actions that entailed provision of unsecured and risky mortgages to customers. The mortgages attracted pulled a large number of customers lead to a housing bubble. Eventually, housing prices came down causing many of the homeowners to default their mortgages. These trends caused liquidity problems among financial institutions causing the collapse of the financial system. The effect of the collapse spread out to other sectors of the economy and other parts of the globe. A problem that was limited to a single economic sector became a global problem. The crises highlighted how globalization had thickened the web of interdependence around the globe (Senge, Lichtenstein, Kaeufer, Bradbury & Carroll, 2007). Small ideas can also lead to the development of innovative product that transforms the business landscape and society. There are numerous examples in this respect. Mark Zuckerberg and his friends provide excellent examples on how a small idea can lead to transformational change. Mark Zuckerberg and his friend are behind the development of Facebook and the social networking technology. Initially, the idea was fairly simple. The site was only design to connect students in Harvard. However, the idea expanded gradually as a result of interactions with other factors, amplifying actions, and contextual conditions to become the largest social networking site in the world. What began as an idea for connecting a few hundred students now connects over one billion users earning the owners billions of dollars in revenues. The innovation also transformed the information and communications industry by introducing a new and interactive platform for communicating. Today, the idea continues to apply and transform other fields such as education, advertising, public relations, and others. Companies that operate in complex environments have no option but to innovate. Innovation is one of the approaches that companies use to survive and adapt to changing environments (Carlisle & McMillan, 2006). This requirement calls for the creation of flexible and responsive model of leadership and management. In the light of these arguments, leadership theory needs to transition to new perspectives. Leaders need to cater to the complex adaptive needs of the firm. Leadership needs to be viewed as a dynamic process that is expedited through interdependent actions among numerous people to form a collective venture (Lichtenstein, Uhl-Bien, Marion, Seers, Orton & Schreiber, 2006). In complex business environments, leaders need to take the responsibility of establishing initiatives the will lead to transformational changes. Senge et al. (2007) explain how the complexity of the environmental problem makes it difficult for governments to exercise control. The authors argue that government capacity to control environmental problems is limited by geographical boundaries as most modern companies are transnational. Changes in political regimes also limit governments’ role in managing environmental challenges. Consequently, organizational leaders need to take up the role of promoting sustainable practices.

Conclusion The complexity theory changes the traditional understanding of business systems. It suggests that businesses operate in dynamic systems that exhibit nonlinear and deterministic relations between components. The complexity theory calls for business entities to live akin to living organism by developing the capacity to learn and adapt. Organizations need to develop the capacity to learn and adapt in order to survive and excel within their environment. Leaders also need to shift the model of leadership and management. They need to create flexible and responsive organizational structure and cultures so as to facilitate learning.
Extending the Conversation The complexity theory has several implications to the practice of leadership and management. The first implication is that long-term planning is impractical. The complexity theory suggests that the complexity of the interaction and relationships between components of a given system make it impossible to predict outcomes. Consequently, it is impractical to make long-term future plan as factors that affect future outcomes are random. The second implication is that organizations need to learn and adapt. The system theory also suggests that organizations are capable of adapting and adjusting to changes in their environment. They argue that agents that exist in a complex environment simultaneously adapt to changes within the environment giving rising to new complexities (Plowman et al., 2007). The theory emphasizes on the importance of learning and continuous improvement within organizations. The theory has demonstrated that only companies that are capable of learning and continuously improving their fitness survival and become dominant within their industries. Firms can facilitate learning by developing nonhierarchical and decentralized structures and a culture of systems thinking (Levy, 2000). Firms that focus on static configurations of assets and resources are unable to compete in these dynamic environments.
References
Carlisle, Y., & McMillan, E., (2006). Innovation in companies from a complex adaptive systems’ perspective. E:CO 8 (1), 2- 9
Cooper, M., (2011). Complexity theory after the financial crisis. Journal of Cultural Economics. 4 (4), 371- 385
Koen, F., (2005). Evolution, Innovation and the Complexity Theory. USA, Edward Elgar Publishing
Levy, D. (2000). The application and limitation of complexity theory in organization strategy and theory. Retrieved from http://www.faculty.umb.edu/david_levy/complex00.pdf
Lichtenstein, B., Marion, R., Uhl-Bien, M., Seers, A., Schreiber, C., & Orton, J., (2006). Complexity leadership theory: An interactive view on leading in complex adaptive systems. E:CO 8 (4), 2- 12
Litaker, D., Tomolo, A., Libaratore, V., Stange, K., & Aron, D., (2006). Using complexity theory to build interventions that enhance healthcare delivery in the primary care setting. General Internal Medicine. 21 (2), 30- 34
Marcol, G., (2005). A new system thinking: Implications of the sciences of complexity for public policy and administration. PAQ FALL, 297- 320
Plowman, D., Baker, L., Bek, T., Kulkarni, M., Solansky, S., and Travis, D., (2007). Radical change accidentally: the appearance and amplification of small change. Academy of Management Journal. 50 (3), 515- 543
Senge, P., Lichtenstein, B., Kaeufer, K., Bradbury, H., & Carroll, J., (2007). Collaborating for systemic change. MIT Sloan Management Review. 48 (2),44- 53