Complexity theory perspective - Part 1

Since the beginning of my PhD research journey, I have intended to use this blog as a platform to persuade you that a complexity theory perspective can be beneficial in managing, governing, and sustainably developing complex systems.

Complexity theory is the scientific theory of change and transformation of complex systems. A complexity theory perspective reflects why, what, and how changes in a complex system and its surrounding environments occur and co-influence each other; the openness of the system and its boundaries; learning as well as innovative capacities of the system in time, and considers the nonlinear dynamics of system's interrelationships/ interconnections and existing paradoxes. Without such a perspective, management of agents of complex systems becomes completely regulatory, completely objectivist, hierarchical, linear, reductionist, and positivist.

A complexity theory perspective can be beneficial in studying the packet of strategies and activities for sustainable transition/ development/ evolution of supply chains and LTH. In context of  supply chains, this perspective can enable us to:

·  Take a more holistic view on different strategies and activities and then selecting those which are most appropriate for each type of supply chains

·  Analyze antagonistic effects of strategies and activities on each other and recognize conflicts of a paradoxical character existing in supply chains

·  Analyze the changes influenced by/influencing the strategies and activities

·  Avoid too much simplification of the systems; i.e. run them at the edge of chaos where enough diversity and freedom, among the sub-systems, for sake of self-organization is appreciated. This can lead to evolutionary sustainability and innovation if conducted with an appropriate organizational culture

·  Design and re-design the transition paths for each type of supply chains. Differences among different industries have led to different supply chains network structures, services, and logistical flows among them. In addition, supply chains are influenced by different types of natural and human resources as well as social context in which they operate. Supply chains may even nonlinearly develop vertically and/or horizontally at different stages of time. As a result, the transition path towards sustainability might be different for different supply chains or even for one supply chain in different periods of time.

Openness

Complex systems are open systems which interact with their surrounding environment. However, it may be difficult to define clear borders around complex systems. In other words, the boundaries among the subsystems as well as between the system and its surrounding environment may dynamically change due to continuous flows of information and resources passing through them.

Although it might be easy to define clear border among tangible resources at LTH (like buildings, laboratories, workshops, and equipment), it is difficult to do so for intangible resources (like brand, reputation, culture, knowledge, skills, motivation, and capacity for communication and collaboration). These are we (the agents of LTH) and our interactions that dynamically determine the state of intangible resources at LTH. As intangible resources are borderless, LTH is borderless, too.

Supply chains are open systems with continuous flows of goods, resources, information, and finance passing through them. Flows of goods relate to huge amounts of materials and products (raw materials, in-process and finished products) as well as packages (primary, secondary, and tertiary) moving across networks of supply chains. There are also significant numbers of movable resources like humans and machines (unit loads and cargo carriers, vehicles, robots, machineries, etc.). Supply chains are also open to both horizontal and vertical flows of data and information as well as finance passing through them. This openness makes the supply chains dynamic and able to self-organize.

Due to, for example, division of labor and knowledge, economy of scope, economy of scale, market diversification, e-business, free trade, offshoring/outsourcing, and globalization of labor force, supply chains are evolving globally both horizontally and vertically. As a result, it is very difficult to define exact border for supply chains.

As supply chains are open systems with continuous flows through them from the entire globe, global governing rules and policies are required. Although tougher national regulations (rules and policies) can be defined, international regulation are also required. For example, introducing GHG emissions taxes or eco-labeling should become global to make the price and trade of exported/imported goods as well as services fare.

Nonlinearity

Another difference between complicated and complex systems is the nature of interactions among their subsystems. The former have only linear while the latter have both linear and nonlinear interactions. Nonlinearity means that causes (inputs) are not directly proportional to their effects (outputs). Big changes can have little or no effect while small changes can have drastic effects over a period of time.
Interactions in complex systems are also sensitive to their initial or starting conditions, their current context, and the history of the subsystems.

By analogy, nonlinear side effects of decisions (strategies) and actions (operations) at LTH should be taken into account. For example, small investment on research areas / core competencies as well as interactions among them over a period of time can lead to huge ROI (return on investment) in the future. The effect of increasing ROI can be seen when, for example, more patents are registered; new jobs are created; and the knowledge is exported.

There are also research-based evidences of nonlinearities in the supply chains. ‘Bullwhip effect’ is a good example of such nonlinearities. The bullwhip effect describes how tiny initial shifts downstream in supply chains (like customer demand or order quantity) can result in upstream chaotic and extreme events via dynamical nonlinear processes.
Another example is the tremendous reduction of transport and traffic intensity and as a result negative environmental impacts by small changes in dimensions and materials of packages. A further example is nonlinear relation between vehicles’ speed and fuel consumption in transportation.

The first lesson for governing transformative transition of supply chains and logistics towards sustainability is to understand the nonlinear effects of governing rules and policies. Some todays’ decisions and actions may have high consequences on future decisions and actions. For example, decision about investment on logistical infrastructure or design of supply chains may have long-term effects on future of supply chains operations. Although study of all nonlinear consequences (effects) of today’s sustainability oriented decisions and actions (causes) might be difficult, some tools like scenario analysis and agent-based modeling can be helpful.
The second lesson is to implement rules and policies that may have a larger consequence than others. For example, it is expected that several new clean technologies needed for greening the transport, infrastructures, production, and base industry be introduced by 2020 (in the transformation phase of growth cycle). After 2020 (in the rationalization phase of growth cycle), governing rules and policies should be defined which encourage implementation of those clean technologies that may have the largest consequence beyond greening (i.e. job creation, safety and security, etc.).

Co-adaptation and Co-evolution

A Complex Adaptive System (CAS) both reacts to and creates its surrounding environment. In other words, changes in the system both shape and are shaped by changes in the environment. Dynamic interaction/relationship between the system and its environment – in addition to dynamic interaction among the subsystems – take us from issues of simple adaptation and evolution to issues of co-adaptation and co-evolution. Schemata of CAS co-adapt and co-evolve with schemata of its surrounding environment.

That’s due to belief in co-adaptation that LTH, in line with the third mission of Lund University, has very close collaboration with its surrounding environment like industries/businesses, organizations, and society in general. New schemata (like strategies, regulations, technologies, and infrastructures) of the surrounding environment influence the schemata of LTH. On the other hand, the schemata of LTH also influence those of its surrounding environment.
That’s why education and research at LTH is both theoretical and practical (applicable by surrounding environment). We follow the seal of the Lund University; "Ad utrumque: Prepared for both"! It has also been formulated by university as: Förstå (Understand), Förklara (Explain), and Förbättra (Improve)! Our understandings, explanations, and improvements at LTH both change and are changed by those of our surrounding environment.

However, increasing the diversity of collaboration may open the doors to co-evolution. Diversity can happen by: collaboration with different types of industries/businesses and organizations; horizontal collaboration with different universities; collaboration with different types of people; and collaboration at different local, regional, national, continental, and global levels. The art is to make an optimal diversity and collaboration among resources, courses, and research groups/projects.

Changes in the supply chains also both shape and are shaped by changes in the surrounding environments. Surrounding may relate to natural-, organizational-, business-, or social environments. Supply and demand for goods and services in the surrounding environments shape the supply chains. Supply chains are also shaped by available infrastructures, technologies, resources, as well as surrounding natural environments. On the other hand, changes in supply chains like launching new products and services re-shape the existing surrounding environments.

The new schemata for governing sustainable supply chains should encourage adaptation of emerging sustainability oriented technologies, norms, and behavior. Sustainability schemas of supply chains co-adapt and co-evolve with increasingly emerging clean- technologies, services, infrastructures, and regulations.

Adaptation

Some complex systems, in addition to the previous properties, have also property of adaptation. Complex Adaptive Systems are self-organizing systems which learn to adapt to changes in circumstances. They are pattern seekers which interact with their environment, learn from their experience, and then adapt; they do not respond passively to events. In other words, they can anticipate the future by learning from past patterns in time.
For being adaptive, some of the agents of the complex systems must have the property of agency (the ability to act according to certain values, rules or norms (schemata) and interact meaningfully in the course of events). Agents react to changes in their environment simultaneously as they create their local surroundings.

In context of LTH, its agents (like researchers, students, staffs, and other stakeholders) should also learn the schemata of the faculty membership. Although the agents should have optimal freedom to self-organize and think out of the box, they should also harmonize them by the schemata (values, norms, and strategies) of LTH. On the other hand, LTH must also harmonize its schemata by changing needs of its agents.

Supply chains are also Complex Adaptive Systems as they have some components with characteristics of agency (like intelligent- resources (humans, machineries) and goods). The agents have also schemata (norms, values, beliefs, and assumptions that are shared among whole of the system) and are in connection (interrelationships) with other agents. Existing rules, regulations, and schemata help the agents to act more predictably and cybernetically. However, giving more freedom and higher degree of autonomy to the agents increases the probability of the emergence of innovative properties. Supply chains redesign and restructure their strategies and operations, respectively by learning from emerging patterns of trends, technologies, and supporting infrastructure.
The first lesson for governing sustainable supply chains is to increase its agency characteristics. The agents can intelligently process and analyze the information and learn from the events without a controller. The second lesson is to define simple top-down sustainability oriented schemata (regulations, rules, policies, and norms) while letting the bottom-up innovative self-organized and adapted schemata emerge also. For example, freight transport and distribution must have the flexibility to self-organize themself while transferring and adapting supply chains sustainability schemata. Another lesson is to consider the different requirements of different industries and markets in the regulations. In other words, one shoe does not fit all; i.e. one regulation or standard cannot be suitable for different types of industries or markets.

Last but not least do not forget that adaptation takes time! Although innovation can be radical, adaptation of new technologies as well as change of behavior are just incremental.

The new year's resolution (Nyårslöfte)

Dear reader of this blog;

Happy new year!
One of my this year's resolutions (årslöften) is to update this blog regularly. I promise to do so especially for those who are not still heartily persuaded that sustainable development of complex systems call for a complexity theory perspective.

I am really grateful for your feedback and comments ...
Next: Adaptation

Evolution

Some complex systems have two other very important characteristics: evolution and adaptation. These two are briefly explained in this and next posts, respectively. In future posts, Co-evolution and Co-adaptation and their embodiment in context of LTH as well as supply chains will be described.

Evolution, in general, is defined as a process of gradual and progressive change or development over time. Evolution is change of complexity and adaptation of complex systems in time. For me, evolution is the loveliest characteristic of complex systems where an inception starts. Based on what I have understood till now, evolution has originated from discipline of biology with belief in two generating mechanisms; natural selection and genetic drift. For sake of simplicity, I just exemplify some dimensions of natural selection which may help a complex system like LTH to evolve (I have adopted the principles from http://necsi.edu/):

1) Variation in species: This may relate to existence of optimal diversity of/at departments and divisions. Diversity should be in humans (for example students, researchers, and personnel) and their skills, research areas, research projects, courses and programs, etc.

2) Organisms produce more offspring than actually survive: There should be enough students and researchers in all levels from bachelor to professorship.

3) Organisms must struggle to survive: The organisms, like agents or departments at LTH, must be provided with enough resources and facilities. In addition, agents should also themselves struggle to earn resources like money; projects; contact with other faculties, universities, and industries; etc.

4) Some variations allow members of a species to survive and reproduce better than others: The agents, like departments or divisions, should train their students and personnel in a way to prepare them for surviving, like finding or creating jobs, after graduation.

5) Organisms that survive and reproduce pass their traits to their offspring, and the helpful traits gradually appear in more and more of the population: The senior researchers and graduate students must share and transfer their knowledge and experience with junior researchers and undergraduate students in time.

All the above mentioned dimensions provide opportunities for evolution in supply chains as well. Some examples inspired from the above principles can be as follow:

1) Variation in supply chain resources (both tangible and intangible);
2) Back up from upstream agents of the chain like dual sourcing than single one;
3) Optimal expanding and diversification of the downstream links like entering the new markets or creating new demands;
4) Shifting from supply chain view to value network view;
5) Translating markets’ values for each type of chain in the network.

Supply chains have tremendously evolved since their existence. Developing from traditional transport links to logistics and distribution and then combination with marketing and production are all evidence of evolution in supply chains. Supply chains have also faced with revolution in their evolution. For example, Industrial- and Information revolution as well as globalization (by introduction of GATT (General Agreement on Tariffs and Trade) and its successor, WTO (World Trade Organization)) have tremendously affected evolution of supply chains.
In my current standpoint, I do believe that there is not naturally any guaranty for sustainable development in complex systems. What we can do is to make and run semi-sustainable strategies and operations, respectively which may show a pattern of emergent sustainability in both short- and long-terms. If we succeed to gradually develop while sustaining the system in the long term then we can open the door towards evolutionary sustainability. The role of a leader for sustainable development is to navigate the system in the direction towards emergence of evolutionary sustainability.