The vicious cycle of Emergent Properties, Variety, complexity, and resources

As I mentioned before both emergent properties and variety (Ashby’s law) are essential for business success and should be the focus of management. To be on top of the competition and the complex business environment each company needs to add or increase properties that can be created just by groups (emergent properties) and the number of states and resources (variety) within the company. To create new or improve emergent properties and to increase variety, companies need more people. When companies add more people, they’re exponentially increasing the complexity of the companies. Complexity, in some point of time, will start to develop chaos and when chaos is crossing a certain level, the impact on a company is devastated.

To prevent chaos from reaching negative impacts companies are investing resources to decrease chaos, but the paradox is that adding more resources is increasing complexity. Regardless of the inherent complexity of a company and due to the need to gain more variety than the business environment, there is an external demand to increase complexity. Anytime that the business environment variety (or complexity) grows it requires the internal company variety to grow. Without increasing internal variety a company can’t be relevant in the market. As you know, the business environment variety keeps on growing all the time with the introduction of new companies, technologies, business models and legislation. Therefore, due to the increased complexity of the business environment, the complexity of companies keeps on growing all the time as well.

The internal and external grow in complexity requires more internal resources, but regretfully complexity will always grow exponentially compering to resources. Therefore, at some point in time, a company won’t have enough resources to deal with complexity, and it will go out of business. The moral is simple: without finding a way how to increase the variety and emergent properties without increasing complexity companies doomed to collapse. That is the reason why management should be focused on this vicious cycle.

The best way to see and understand this dynamic is by real-life example, so I’m going to walk you through the evolution of the automotive industry that is probably one the best example for this dynamics and it positive and negative impacts.

Ford & Taylorism

Our story starts more than 100 years ago in the second industrial revolution. The hero of this chapter is Henry Ford that finds out a way of car mass production with just a little help of his friends. Grouping people together into big factories and use people hands as the machinery to produce cars was his basic idea.

The main problem that Mr. Ford and many other manufacturers of this time experience were that the people they hire used to be craftsmen. As craftsmen, people were generalists that were capable of doing several masteries to run their shop. Now they were forced by the reality created by big manufacturers to join them. Having generalists in an environment looking for mass production was a problem that Fredrick Winslow Taylor was about to solve. Taylor introduces his scientific management theory that in a nutshell proposed to separate thinkers from doers, put the thinkers in the top of the hierarchy and the doers in the bottom. The thinkers need to use data to find better ways how to run the business, and the doers need to perform what they been told. Taylor also required that the doers will specialize in one task that they need to do. This system creates one organization controlled by one at the top of the hierarchy and a few others in one layer below him. There where others that contribute to this management system such as Weber, Fayol and Owen. For more data on different management system read our post – Do you know which management system works for you?

Ford found out how to create emergent properties of mass production by grouping people together. Just a mass of people working together in a factory can reach mass production. From a variety point of view, Ford without knowing increased variety by producing cars from many parts that provide a more convenient way of transportation than horses. To control the invadable complexity associated with more resources, Ford adopted a strict command and control system.

This system worked for Ford (and others) exceptionally well mainly because 100 years ago the business environment was still very linear (much less complexity). The variety inside Ford was very limited due to the structures (monolithic) and the fact that Ford at those days produce just model T, in plenty of colors, as long as it was black.

General Motors (GM)

After a rough start, GM understood that their only way to take the leadership from ford is to provide variety. GM (under the leadership of Alfred Sloan) looked for a way to sell different types of cars for different groups of people with the ability to choose from a verity of features and colors per model.

GM understood the need to create new emergent properties and increase variety within the company to be able to provide a verity of car models with different options of features and colors. GM solution was the idea of divisions within a company. GM form divisions and gave them autonomy to define how to design, manufacture and sell different brands of cars in verity of options. This autonomy both increase variety within each division and enable different and new emergent behavior of teams within organizations. GM teams are responsible for power steering and power brakes, independent suspension, and automatic transmission. GM was the first auto company to change its cars’ features and styling almost annually, which encourage Americans to change their vehicles every few years.

With the variety and emergent properties, GM managed to take the leadership from Ford and beat almost any metrics and previous achievements in any American industry. To deal with the increased complexity, GM came with a command and control mechanism used by the central GM company. A system that many people claim to be more strict than the Ford management model.

NUMMI & Toyota

As described in this post, at some point in time complexity in GM grew to much to a level that GM had to start closing factories in the late 1970s and early 1980s and end up with going Bankruptcy latter. One of the factories that were closed was probably the worst factory that GM ever had; it was the Freemont, CA factory.

During those years Toyota started to realize that they are lagging behind other Japanese car manufacturers in their ability to manufacture cars in the states, so the Japanese manufacturer came to GM with an offer they couldn’t refuse. Toyota suggested GM open together with GM the Fremont factory to manufacture GM cars, but with a new system called the Toyota Production System. Obviously, each partner on this deal had a different goal. GM wants to learn the unique method that manages to produce more cars in better quality, while Toyota wanted to see if their system can work in the American culture. In late 1984 the new collaboration under the name NUMMI started to produce cars with the same employees that GM employed before.

I won’t go through the success story of NUMMI, you can find it in my blog post, books or using google. In a nutshell, Toyota Production System managed to turn the same factory with the same people from the worst factory that GM had to the most successful factory that GM had.

The success of Toyota and NUMMI spread across the USA and influence almost any industry. From this blog point of view, Toyota increased and created new emergent properties based on giving autonomy to teams (comparing to divisions autonomy in the GM model). Toyota also increased variety by giving autonomy the team model, and in some scenarios even to individuals. As a result, Toyota manages to manufacture verity of smaller cars on the same production lines with much more high quality that gave them the leadership of the automotive industry.

The most exciting element in the Toyota model is what they put in place to deal with complexity. Toyota took the opposite approach of Taylorism. In the Toyota system, every employee is a thinker and a doer. Any employee expects to work together with others as a team of usually five people, to practice other team members expertise to replace him when is needed, to come with new ideas how to improve quality and production. Employees expected to be an integral part of the car manufacturing process.

In the hurt of the Toyota way, there is an assumption that people want to be part of the organizations and to be part of the organization success. Toyota trusts the employee, while previous management systems saw employee the opposite way.

NUMMI implemented mutual trust and respect with visual aspects such as no executive parking lots and no management lunchrooms. Office walls were removed as supervisors held their meetings on the shop floor. Everyone from CEO to downwards wore a NUMMI uniform rather than white shirt and tie. The traditional lines of separation between superior and worker were blurred socially and psychologically.

What’s next?

I hope that this example helped you to understand the role of emergent properties and Variety play in organizations success. I assume that you can see the complexity associated with those two requisites for success and different management approaches that tried over the last 100 years to deal with complexity.

The variety in our world is growing all the time exponentially. New virtual commodities, new business models, new competitors, new legislation and new technologies are all examples for the ever-increasing complexity of the business world.

This new reality required companies to find different ways how to structure themselves, motivate people and manage resources (AKA management). It’s just a matter of time until a new model will gain dominance and win the current state of the evolution of organizations. If this will be a model that you came with, you probably are going to contribute to your existing organization, and then to many other companies.


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