His discussion coheres with thoughts I've be considering recently...how People, Processes, Organizations, and Technology intersect with Cynefin. Here's a few observations:
- It seems that IT-intensive businesses move roughly from Complex to Complicated to Simple in the following sense: an amorphous vision emerges in Complex space where existing knowledge and interoperable resources are "mashed-up" in unexpected ways to explore potential new capabilities. A one-of-a-kind capability is created, which, if it is valuable enough, creates a rough pattern for creating new versions of the capability in Complicated space. If the new capability can find a relatively large market, then a vertically integrated architecture will emerge where the capability begins to segment into interoperable layers. Finally, if the interfaces among the layers become standardized, the overall capability may move into Simple space where each of the layers becomes a submarket with vendors competing to provide components, assembly line integrators allowing end users to "build their own" capability, and the few vendors with critical intellectual property controlling the ecosystem of the new mass market version of the capability.
- An example from the area of computers: IBM's Stretch (Complex, moving into Complicated), IBM System/360 family (Complicated, moving into Simple), and the IBM PC (built from interchangeable parts; quickly became dominated by Intel and Microsoft, and a volatile, competitive, low margin market for almost everything else, including integration of the parts).
- Such a cycle might be seen in physically-intensive industries (e.g., automobiles, guns), but the lack of malleability of a product that is mostly physical (vs. a product that is dominated by information) constrains the evolutionary potential.
- Businesses in Complex space tend toward small high-margin consultancies, innovation groups, and startups. They are exploratory groups that focus on vision, probing, and prototyping.
- Businesses in Complicated space tend toward large medium-margin analytically-oriented organizations that work to bridge the gap between a new capability and the existing ecosystems of People, Processes, Organizations, and Technology. They are exploitative groups that focus on architecting and systems engineering to provide the new capability to users who can afford it. As the vertically integrated capability finds a larger market, it begins to segment horizontally, and the businesses tend to shift toward processes that are less "skunk works" and more "Six Sigma."
- Businesses in Simple space tend to be large low-margin rules-oriented organizations that work to provide a generic capability at the cheapest price possible. They are exploitative groups that focus on predictable process execution. As the capability moves into a mass market, standard interfaces result in submarkets of interoperable components.
- The interoperable components and associated standards eventually float into a Chaotic space where they can be recombined to start a new cycle of Complex-Complicated-Simple.
- The cycle time through C-C-S decreases dramatically wherever a wide range of interoperable components and associated standards appears. At some point, the cycle may be largely Complex-Simple, with little, if any, movement through Complicated.
As I was putting these thoughts together, I reviewed a HBS Working Paper ("The Architecture of Platforms") by Carliss Baldwin and Jason Woodard I had read a year or so ago. My notes in the paper prompted me to look for other presentations by Baldwin. She has a number of them that discuss IT architecture's shift from vertically integrated capabilities to horizontal layers of modules...her "Design Theory and Methods" presentation at L'Ecole de Mines (Oct 2007) has a series of slides on the computer industry from 1979 to 2005 that nicely illustrates the point.
And, Clayton Christensen's latest book, "The Innovator's Prescription", covers similar ground. See this presentation from the Health Information Technology (HIT) Symposium. The voice track helps but is not free (unless your company subscribes to a service which provides this sort of thing).
Finally, it's not just the good guys who understand this dynamic...the agility and adaptability of the bad guys in asymmetric warfare indicates the importance of being able to quickly cycle through Complex to Complicated to Simple...or maybe just cycle quickly between Complex and Simple as communications, command and control, processing, and sensor capabilities are increasingly interoperable, cheap, and pervasive.
