Complex or complicated?

Understanding the difference between complex and complicated systems is critical to successfully lead companies in the 21st century

Do we live in a complex or complicated world? Are companies complex or complicated systems?

This is not a semantic argument: understanding the difference between complex and complicated systems is essential to change the way we see companies and, consequently, managing them successfully in the 21st century.

Complex is different from complicated

Most people use the terms complex and complicated interchangeably. For others, complex means something that is extremely complicated. Both are wrong.

A complex system operates with a different logic than a complicated system. These are two different types of systems instead of different degrees of complication.[1]

A car engine is complicated, traffic is complex.

Building a skyscraper is complicated. The functioning of cities is complex.

Coding software is complicated. Launching a software startup is complex.

A complicated system has a direct and clear cause and effect relationship. Its elements interact in a predictable way. For each action, there is a proportional reaction. Its problems are often difficult to solve but can be solved with rules and processes after a rational and specialized assessment. A complicated system, like any mechanical equipment, is controllable and allows permanent solutions.

A complex system, in turn, is composed of elements that interact with each other exhibiting a dynamic and adaptive behavior. The relationships are more important than the elements themselves. Interactions are what matter.

These interactions can give rise to unpredictable behaviors, with no single identifiable cause. Small actions can lead to huge reactions, while great interventions may prove ineffective. A system capable of surprising the best forecasts is always a complex system.

As the problems of complex systems involve many interrelated factors, it is not possible to treat them in a fragmented way or to reduce them to rules or processes: it is necessary to understand them in an integrated way, analyzing the entire system.

The problems of complex systems cannot even be solved permanently. The best one can do is to positively influence these systems or, as pioneer on this field Donella Meadows pointed out, learn to dance with them.[2]

For those more interested, I provide a table at the end of this text highlighting the main differences between complicated and complex systems.

What about companies?

Do you believe that a company is a complicated or complex system? The answer is obvious. All biological, psychological, and social systems are complex.

A company is a complex human community that should be continuously shaped in order to create sustainable value for all its stakeholders.

It is not a complicated machine for which a “solution” must be found in order to maximize shareholders’ returns.

Viewing the company as a living system instead of as a mechanical system means accepting that it is full of uncertainties and surprises, an organism with which we need to interact continuously to influence it towards the desired state.

Understanding that organizations are complex systems also means realizing that a company cannot be “fixed” or “solved”, just as a person cannot be “fixed”: what leaders can (and should) do is creating the best possible environment so that the company and its members can thrive in consonance with the organization’s purpose and values.

The problem, though, is that most business leaders continue to run their companies like machines rather than living systems.

These leaders believe that, as long as they invest a lot of resources in terms of time, human capital, technology and money, they will be able to: predict the future; control the outcomes of their initiatives; find permanent solutions to the problems; and, come up with the “right” answers to their doubts. What’s more: leaders with a mechanistic view believe they can control employees’ behavior and decisions through constraints such as rules, policies and processes.

None of this is possible in a complex system.

On the contrary. Trying to solve complex problems, typical of the corporate world, with a complicated mindset does more harm than good: in addition to being counterproductive, this mental model produces serious side effects, such as ethical blindness, generalized disengagement, lack of innovation and low productivity.

As well-summarized by Aaron Dingnan, author of a book about the future of work, “every five-year plan, every annual budget and every fixed target is a public confession that we don’t understand the nature of our organizations. Our desire for control blinds us to the truth”.[3]

Just as physics has evolved from classical mechanics to quantum, the business world must evolve from the complicated to the complexity mindset.

What to do then?

Leaders with a complexity mindset know that it is not possible to control the outcomes of the organization through detailed planning, complicated incentive systems and meticulous rules.

They understand that the company’s performance is above all consequence of its culture, collective intelligence, sense of purpose and self-regulation among its members.

They also know that, if they can create the right conditions, people will find ways to work with excellence and achieve business goals in accordance with the organization’s values.

Adopting a systemic thinking means leading the organization based on a set of new principles that allow building a continuously adaptable, resilient and high-performance organization. Among these principles, stand out:

§ Adopting general guidelines instead of detailed rules;

§ Emphasizing autonomy and maximum freedom with accountability;

§ Ensuring full transparency and real-time information for everyone;

§ Focusing on building trusting relationships;

§ Establishing an emotionally positive environment;

§ Making use of the collective intelligence of all members of the organization through diversity, inclusion and psychological safety;

§ Promoting a culture of continuous experimentation and learning;

§ Celebrating failures as part of learning towards excellence;

§ Focus on responsiveness instead of on the implementation of detailed plans;

§ Understanding that the value of planning exercises lies in the joint reflection on multiple scenarios rather than trying to predict the future;

§ Carrying out organizational changes organically, departing from each in a bottom-up approach; and

§ Making decisions with the active participation and consent of all impacted people.

Applying the above principles based on a systemic thinking that understands and embraces complexity is not only a nice to have: it is an imperative to successfully lead companies in the 21st century.

The 20th century, characterized by a relatively predictable environment that rewarded repetition and in which performance was a matter of engineering independent of human emotions, allowed leaders to manage organizations with a linear and Cartesian mental model.

In the 21st century, characterized by an unpredictable environment that rewards flexibility and in which performance is a matter of psychology intrinsically associated with human emotions, it is essential for leaders to manage organizations with a non-linear and systemic mental model.

A big challenge for leaders

Evolving from the complicated to the complexity mindset is a paradigm shift. It is a major challenge for most executives, generally averse to ambiguity and uncertainty after having built their careers based on predictability and control.

For those who manage to make this mental upgrade, the prize will be huge. Learning to appreciate the dynamic and interconnected context in which we live provides a sense of relief, an incomparable benefit against the chronic stress of trying to control the uncontrollable.

Developing a systemic thinking is also a competitive advantage. The 21st century world will belong to individuals and organizations that manage to fully develop their humanity as well as continuously adapt through ongoing learning, mutually beneficial relationships and a sense of purpose.

As Professor C. S. Holling, one of the pioneers of systems thinking, pointed out, “in complex systems, wealth should not be measured in money or power, but in the ability to adapt.”[4]

Prof. Dr. Alexandre Di Miceli is a professional speaker, business thinker and founder of Virtuous Company, a top management consultancy that provides cutting edge knowledge on corporate governance, ethical culture, leadership, diversity, and company purpose.

He is the author of “The Virtuous Barrel: How to Transform Corporate Scandals into Good Businesses” as well as of the best-selling books on corporate governance and business ethics in Brazil, including “Corporate Governance in Brazil and in the World”, “Behavioral Business Ethics: Solutions for Management in the 21st Century”, and “Corporate Governance: The Essentials for Leaders”.

He thanks Prof. Dr. Angela Donaggio for her valuable comments and suggestions.

7 differences between complicated and complex systems[5]

[1] Poli (2013) details the differences between complicated and complex systems.

[2] Meadows, D. (2001).

[3] Dignan, A. (2019)

[4] Kinni, T. (2017)

[5] This table was built based on the texts of Poli (2013) and Blignaut (2019).

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Professional speaker, business thinker and founder of Virtuous Company, a top management consultancy on corporate governance, culture, leadership, and purpose.

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Alexandre Di Miceli

Alexandre Di Miceli

Professional speaker, business thinker and founder of Virtuous Company, a top management consultancy on corporate governance, culture, leadership, and purpose.

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