Saturday 6 October 2012

Organisations and the laws of thermodynamics

In  Surfing the Edge of Chaos, Pascale starts to describe organisations as complex adaptive systems, rather than using the more traditional functional forms.  It's interesting that complext adaptive systems have four properties:
  • composed of many agents acting in parallel
  • continuously shuffling the building blocks
  • subject to the second law of thermodynamics, exhibiting entropy and winding down
  • has the capacity for pattern recognition
It's the third property that fascinates me - as this seems the significant step up from traditional analysis of organisational forms and strategy.  Alfred Marshall defined the maths that describe economics as a science to be compared with physics.  This used fundamentally first law principles, and worked as a theory in periods of slow market change.  However, since the technologically revolutions of the last 20th century, the first law principles seem to fall down regularly.

Enter Pascale and the era of complex adaptive systems.  The organisation and the market cannot be controlled or predicted purely by considering energy - if we invest more in X, we can defeat competitive spending in Y.  The equation becomes more complex, with the evolution of unexpected outomes and the time-based nature of the second law - the impact of energy recedes over time as entropy increases.

I wonder if there is some future business analogy to the 3rd law?

Or perhaps we have already seen it - complex adaptive systems are at risk when in equilibrium - a precursor to death.  Perhaps the regular death of major companies is an exhibition of equilibrium at absolute zero - energy exhange with the environment has declined to zero as the processes ossify and the ability to change is reduced to zero.

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