It’s not you — the world has become more complex. Consider 1980.
There was no such thing as a personal computer. The Internet and broadband connections to it were more than a decade away. You used film to take pictures, got them developed in a photo shop, and mailed copies to relatives if you wanted to share them. Roughly half of the 4.4 billion people on Earth were either so poor that they were cut off from the rest of humanity, or lived in regimes so repressive that no outside communication was possible. AT&T was the only telephone operator in the United States; telephony was just one of many high-impact industries that were highly regulated and protected from competition.
Today’s decision makers face environments in which things that were isolated from one another just 30 years ago are bumping up against each other, often with unexpected results. That’s because of a host of technological and sociological changes that occurred after 1980:
- digitization of massive amounts of information,
- smart systems that communicate interdependently,
- the decreasing cost of computing power,
- the increasing ease of communicating rich content across distances,
- an increasingly wealthy human population, resulting in more participation in the formal economy, and
- the wholesale rewriting of industry norms and business models.
To choose just one example, it used to be possible for organizations to control what information escaped their four walls. Today, customers can connect with one another on social media sites; employees can tell the world what it’s like to work somewhere; and businesses are routinely evaluated on sites such as Yelp and TripAdvisor. Managing your reputation and its attendant risks has become far more complex.
Citizens used to assume some privacy in how they engaged with public affairs; that, too, is more complex and less clear today. During a 2008 election in California, activists accessed signatures from those who donated money to support Proposition 8. They mashed this publicly available information together with address records and digital maps, and created guided tours to where these people lived. This sort of thing challenges legal procedures, public safety, and how we conduct our political process in ways that would have been unimaginable in 1980.
When things that used to be kept separate bump up against other each other (in other words, when once-complicated systems become complex) it becomes far more difficult to predict what’s going to happen next. Not surprisingly, that unpredictability creates a need for organizations to be far more aware of, and responsive to, changes in their own environment and in the world around them.
Business strategists in particular need to be responsive, because industries are changing in ways they often fail to foresee. Consider, for example, changes brought about by microprocessors becoming smaller, lighter, and less power-hungry. Netbook makers such as Asus projected strong demand growth in their category for 2010, because they assumed more-or-less continuous technological trajectory from portable computers to netbooks as web appliances. Along came Apple’s iPad (introduced in April 2010), and those projections immediately dropped for the second and all-important third quarters. Continued netbook growth would have been logical if the system were merely complicated — instead, the introduction of something disruptive shifted it significantly.
The impacts of the iPad (and iPhone) have been wide-ranging and were fundamentally unpredictable. By putting together functionality that used to be separate in one device, the tablet is simultaneously changing the value equations customers place on portable computers, internet access devices, video cameras, photo displays, and GPS systems, among many others. The casualties range from Cisco’s abandoned Flip video cameras to TomTom’s handheld GPS devices (still around, but sales are flagging). At the same time, the attractiveness of Apple’s “walled garden” approach has created an unexpectedly high barrier to entry for software designers.
The consequences of the introduction of the iPhone and iPad are not just seen in competitive moves. By creating interdependence where it never existed before (communication capability and mapping technology, for instance), the devices have redefined assumptions about how things work across a wide variety of categories, from business to entertainment to communication.
In a complex system, leaders have to rewrite their playbooks and re-jigger their organizations quickly. Look at the current woes of Research in Motion, blessed by fabulous success with its Blackberry device. Who could have anticipated the swift erosion of its competitive advantages with users, who have come to take mobile texting for granted and who are now looking for a whole lot more from their devices? And what of a slew of tech companies making huge strategic decisions in warp speed — such as HP considering exiting its hard-won PC business and Google acquiring Motorola’s phone business, both moves to prepare themselves for radically different futures.
Complex systems are unforgiving places for companies, and people, who move slowly.
RITA MCGRATH Columbia Business School professor