High Order Complexity:Never conflate size or intricacy with (high order) complexity:• What does it mean?• What are some key lessons?

• Management and decision making.• Leadership.• Innovation.• Diversity.

• Many examples – including:• Electricity distribution,• Information and cyber-security,• Others in nature, business, government, the military,

and other institutional settings and movements.- Understanding and embracing complexity is essential to successin management and leadership of all endeavours we encounter.- System engineers and managers can make a specialcontribution.

1

Warning:Beware of following the advice of“experts” (and consultants) ……and “Systems Engineers” (someof who know nothing abouteverything?) …… without validating their views /claims for your own situation.

2

Today’s talk…and some key take-aways.Note:• This work builds on previous

published papers and consensusfindings in the C&APL network.

• The presentation covers muchground, but should be presentedin more detail on futureoccasions.

3

Couch & Associates Pty Ltdsome Background

• A wealth of experience - across cultures,organisation types, business functions,institutions, activity disciplines,

• Virtual business network, contracting andconsulting for some twenty-five years,

• Early work in energy systems - operationsand planning,

• Qualifications, accreditations, interests –systems engineering, law, economics, andtheir application to business andmanagement. (Lifetime interests inmathematics, philosophy, and relatedareas).

4

• Many achievements, challenges,failures.

• Success – which means many thingsto different people (it may even beto some, undertaking a series ofcareer-limiting, “interesting” moves).

• Everyone is different – diverse inputsfrom Associates have been made toform the conclusions in thispresentation; however I alone amresponsible for the content.

• Acknowledgements of help /advice /collaboration of many others.

5

Context: Global Megatrends such as these:• All are certain to occur, but details of how and

when are largely unpredictable.• All are complex and interconnected (one can’t be

addressed without affecting others).In all cases their resolution will involve:• High technology,• New information management tools (and

increasingly use of “Big Data”),• Intense and diverse human interactions.Hence the potential contributions by systemsengineers (or systems managers) and leaders who, asskilled “integrators”, can be well-placed to embracehigh-order complexity – as well as specific subjectspecialists and ideology advocates for the matters beingaddressed.

6

Systems Engineering (S.E.) and Systems Management):• a long tradition (perhaps as old as engineering and management

themselves – consider Newton, and Carnot’s representation):• S.E. takes off with intricate schemes required to be designed and

established to tight specifications, performance, cost and schedules (espmilitary for WWII).

• Physical systems – interconnections of components where the whole isdeduced or synthesised from the parts.

• Projects – interdependent tasks and resources to deliver specified andtimely outcomes.

• Other systems – e.g. chemical, ecological, market and economic etc.systems, I.T., industrial processes, organisation systems and procedures,policies.

• Overlap with other disciplines – e.g. project, value, cost, risk, asset,construction, operations, maintenance, quality management

• Basis in Mathematics – defined broadly as the understanding(and its application) of how “things” [in abstract] operate andinterconnect.

• Complexity (with some examples):• Level 1 relating to Size; Level 2 relating to Intricacy.• Level 3 – Complex Adaptive Systems (the [high-order] “complexity”

addressed in this presentation).

7

Complex Adaptive Systems (CAS) – Level 3 Complexity:• "Your watch is complicated, your family is complex."

Great Krakauer, Santa Fe Institute

• Typical features - many interconnected “agents” with degrees of autonomy,who can help or hinder “success” of the endeavor, with:

• Private interests and agendas,• Scope to enter / leave the system,• Capacity to organise, form alliances, mount defence and attack,• Potential for learning, innovation (at least in appearance – like

the ant swarm or flock of birds),• Opportunities for escalation, activism (e.g. through alliances,

agent recruitment or elimination).• Note: Once human agents with autonomy are included, in addition to the

mathematics base of the system, their philosophies and ideologies can figuresignificantly.

• Examples - in all arenas - nature, business, governments, non-profits, familiesand tribes, conflict, war, terrorism, markets and competition, negotiation,diplomacy, industrial relations, other institutional settings and movementsgenerally.

• Note: While CAS thinking provides useful ”model” of behaviour, it is not areplacement for the “real world” situations being studied.

For an endeavour to succeed in a hyper-complex environment, it must itself take onfeatures of a CAS (Law of Requisite Variety – see Ashby &c).

8

Guidance and insights for management under (high-order) complexity canbe derived from:• Shared experiences (and learning) from success and failure,• Understanding of complex endeavours and their environments.

(With limited willingness to use double-blind trials &c. in develoingmanagement theory, it is usual to revert to consensus processes - quicker,with more powerful conclusions, but can be hijacked /distorted [and inmanagement are subject to many fads and fashions].

The first key for management is in recognising and understanding patternsin the complexity of the situation and using the insights in sound decisionmaking – distributed and encouraged throughout the endeavour beingmanaged.• Note: Innovation and diversity are crucial (more on these another

time – they are not just “nice to have” but essential to “seeing” thecomplexity, and to discovering relevant alternatives andopportunities in decisions to be made).

9

Why Decision making? On one perspective an endeavour may be defined in terms of the aggregation ofall its decisions (implicit and explicit) impacting on its available resources [see previous published papers]– whether in:• The few high-level decisions that have huge consequences, or• The many “storefront and shopfloor” decisions that each usually has lesser impact (but

remember the non-linearities [scope for activism and reputation loss ]), or• Everything in between.Ubiquity - Every person (perhaps not those whose jobs can be automated entirely) who is:• engaged in or connected with an endeavour - has capacity to enhance or detract from its

reputation and value, through the decisions they are making all the time (whether formally orinformally).

• available to work for an endeavour – should as far as practicable:• be skilled and motivated in making sound decisions affecting their particular area,• understand what is likely to be good for (and bad for) the endeavour

Learned and informed - The techniques must therefore (more on these another time)• be simple and easily internalised (and taught) [note: simple doesn’t mean “easy” to do well],• be applied

• using information available (or knowing what information if unavailable would beuseful)

• Knowing the resources available that can be deployed

Hence the importance of leadership - influencing how decision making is done and how it should bedistributed, structured, and scoped (more on these another time).

10

Leadership:Key lesson – In a hyper-complex environment:• Leadership is about effectively influencing others (all

who are connected) in all of the components (1-9 onprevious slide) for sound decision making.

• Leadership must be distributed, and exercised by allwho have capacity to do it (the endeavour must be ableto operate without interruption and thrive/survive ifsome leaders (or even an entire board etc.) are absent /leave the endeavor [for any reason]).

11

Take-away:As complexity increasesWithout intentional and competent decision-makingi.e. if decision-making is:

• Unsound (Process),• Mis-aligned (Structure),• Restricted (Distribution),• Incomplete (Content),• Unsupported by:

• Intelligence,• Learning,• Leadership,

Value is lost and prospects of success are jeopardised

12

Questions and discussion

13

Examples:Electricity Distribution:• Background.• History of transformations to date.• Emerging circumstances:

• Emerging economic feasibility and technical capacity(although not without challenges) for customer and 3rd partyowned and controlled, stationary and mobile, energygeneration, processing, distribution, demand management /smart use.

• Regulatory framework unable to keep up with emergingopportunities.

• Apprehension (escalated through social media), even ifmisinformed among the public that utilities want to kill solarand other alternative or distributed energies, and “tax”customers who want to connect but not take “net” energy.

• Need for further and continuing transformation (although the pastmodels may have served well) to date.

14

Examples:Electricity Distribution – an industry in transition (again):One hopes that the industry’s traditional one-size-fits-all service approach, and itscurrent pre-occupation with revenue entitlements and tariff structures, as important asthese are, will grow into establishing a needed new overall business model – a modelrecognising (among other matters) that its services are becoming progressively“contestable” at the margin.• While there are important technical (including stability, fault level, protection),

safety, coordination (including dispatch and allocation arrangements), equity andcommercial issues to resolve, none need ultimately to be final barriers to change(although all add complication and impose costs).

• Keys are:• Embracing customer sovereignty,• Meeting diverse customer requirements,• Recognising customer preferences and managing expectations,• Informing customers (and the public) and overcoming apparent

alienation (e.g. from perceived self-interest, delay, resistance andprotectionism),

• Moving from a revenue entitlement mentality to one of transparentcharging for customised services,

• Developing a business model that will still satisfy regulatoryrequirements,

• Updating the regulatory framework – to move from rule orientation toanticipating future change.

• Overall, finding a way to continually, sustainably and responsiblyprovide the services that customers want and can be paid for.

15

Examples - InnovationModern telecommunications networkmanagement accommodates:• Third party and network- owned and

controlled,• Plant and equipment,• Mobility,• Diverse sources and users of content,• Aggregators etc.Possible innovative application of this model to• Power networks?• Other industries ?(These questions were considered during anassignment with Clarity International Pty Ltd.)

16

Clarity Software-as-a-Service (SaaS)concept for Network BusinessManagementCapacity to:• Accommodate all potential / useful data

sources,• Connect with legacy and new

communications systems,•Mirror the system in unified data storage,• Support all network business operations

17

Clarity Software-as-a-Service (SaaS) concept for Network BusinessManagement• Capacity to Accommodate all potential / useful data sources

• Plant and Equipment,• Protection, Recording and Controls,• Backup / auxiliary devices,• Subsystems and “systems-of-systems”.

• Covering full range of ownership & control possibilities:• Connected and embedded networks,• Customers’ installations and appliances,• Mobile, distributed, dispatchable/intermittent,• Generation, distribution, other processing, storage,• Third-party aggregation and other involvement,• Metering, data, controls.

Note: Client chooses the scale (granularity, depth) to monitor.

18

Clarity Software-as-a-Service (SaaS)concept for Network BusinessManagement – a framework to:• Connect with all known legacy and

new communications facilities.

Note: Vendor neutrality (fromproprietary plant and equipment andSCADA) is a key feature of thefunctionality.

19

Clarity Software-as-a-Service (SaaS)concept for Network BusinessManagement – a framework to:•Mirror the system in real-time

data storage.Note:• Dynamic and Multiple instances

– big data and responsivenessimplications.

20

Clarity Software-as-a-Service (SaaS)concept for Network BusinessManagement – a framework to:•Support the network business

operations.Note:• Database provides “single

source of truth”.

21

A Software-as-a-Service (SaaS)concept for Network BusinessManagement:• Supported Business Functions,• Current and Future requirements.Note:• When proposed five years ago this

approach was considered toodifficult and too early – it shouldnow be little more thancommonplace.

22

Potential application to otherincreasingly networked industries,e.g:• Health and public services,• Supply chains and outsourcing,• Property &c. regulation and

interests management,• Development, Building, Product,

Services compliance management.

23

Examples: Security – Today more than everindustry is seeing:• The information is the infrastructure; its

integrity the imperative.• Security has become everyone’s

responsibility (as quality, safety etc. becamepreviously).

• Security is a complex system – (in part virtualand remote) IT, applications, networks andequipment, supply chains, with multiplelayers, diverse defences, and people (whetherinside the endeavour’s boundaries or outside,and including those who are hostile andothers whose security behaviour isinadvertent).

24

Examples:Cyber Security important forInfrastructure Industries

25

Examples:Security for InfrastructureIndustries:

Likely questions from a Client tothe vendor of a New Cyber-Security Product.

26

To Summarise:It takes a CAS for your endeavours tosucceed in a hyper-complexenvironment!1. Seeing “The Systems” in context,2. Understanding Interests and

Agendas throughout,3. Focusing on Decision Making,4. Encouraging Leadership –

Influencing - Decision Making,Intelligence and Support,

5. Striving continually for Improvementand Innovation.

27

Related information to beavailable soon –

login towww.capl.com.au

28