COVID-19 - Systems & Complexity Thinking in Action
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First delivered at Mark Esposito's Systems Thinking course at Harvard, April 2020. This talk examines various responses to the COVID-19 pandemic, focusing on economic & social impacts (less on the medical side), with the goal of introducing complexity thinking to organisational strategy. It introduces complexity thinking using Dave Snowden’s Cynefin framework and demonstrates how system loops evolve in the complex domain as a result of safe-to-fail probes. It introduces Simon Wardley’s value chain mapping technique, and shows how organisations can use it to scan for exaptive opportunities as they are making sense of the chaos. Finishes with a still-evolving early view of the macro/mega response of governments, the looming threat of climate change, and the importance of metrics & diversity in system evolution. How will our economic & social system evolve?
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COVID-19 - Systems & Complexity Thinking in Action
- 1. COVID-19: Chaos & Complexity In Action Harvard, Apr 2020 by Steve Purkis images:pixabay.com
- 2. Influences (not endorsed by either) Network
- 4. Chaos
- 6. Chaotic systems are unordered. Random & unkowable. There is no link between cause & effect. Act Sense Respond
- 7. Complex
- 8. RR legend daughter me Seek Attention Whinge R Annoyed Positive Self- Esteem Fed Up Punish Happy Praise Play Fun R ✘ ✘ ✘
- 9. Human Behaviour is Complex Probes ✘dampenamplify
- 10. Probe Sense Respond Complex systems are semi-ordered. Unknown unknowns. No clear link between cause & effect (sometimes knowable afterwards). Interacting with the system can change it.
- 13. Small businesses shutting down
- 14. evictions source: The Guardian “Buy-to-let lenders have not offered any assistance to landlords from our experience. Essential workers are not exempt from such evictions” “Estate agents, property management agents and landlords are very keen to evict tenants as they need the rent paid in full during these difficult times”
- 15. Care for children during work hours Go to daycare legend kids parents home daycare landlord bank gov’t Go to work invoice salary pay daycare pay rent pay bills pay mortgage pay tax charge interest profit Daycare System ✘ ✘ ✘ ✘ ✘ profit ✘ ⚠️ ⚠️ ⚠️ ⚠️ ⚠️
- 16. legend kids parents home daycare landlord bank gov’t salary pay rent pay bills defer mortgage pay tax charge interest survive Daycare System: Response profit ⚠️ emergency support unemployment benefits take care of kids during work hours can’t pay rent evict reduce rent savings reduce interest rates
- 17. Meso: Businesses
- 18. 3 Factors Impacting Corporate Response There are many more, of course… Existing Fragility ● Business model ● Supply chain Cash ● Savings ● Borrowings ● Cashflow $ Remote-friendly ● Customers ● Workforce ● Processes
- 19. Evolution ValueChainvisibleinvisible Genesis Custom Product (+ rental) Commodity (+ utility) uncharted industrialised Modal Digital’s Value Chain Modal’s Customer E-commerce Site E-commerce Consulting Hosting (eg: AWS, Azure, Google Cloud) E-commerce Technology (eg: Magento)User Interface Customisations Third Party Integrations User Experience & Interface Design Bespoke Customisations Technical Support Remote-first workforce Remote-first customers
- 20. Evolution ValueChainvisibleinvisible Genesis Custom Product (+ rental) Commodity (+ utility) uncharted industrialised Modal’s Customer E-commerce Site E-commerce Platform as a Service (eg: SFCC, Shopify) competition standards competition & standards Hosting (eg: AWS, Azure, Google Cloud) E-commerce Technology (eg: Magento)User Interface Customisations future competitionThird Party Integrations User Experience & Interface Design product add-onsBespoke Customisations E-commerce Consulting Technical Support Modal Digital’s Value Chain Already under threat!
- 21. Evolution ValueChainvisibleinvisible Genesis Custom Product (+ rental) Commodity (+ utility) uncharted industrialised Modal’s Customer E-commerce Site E-commerce Platform as a Service (eg: SFCC, Shopify) Hosting (eg: AWS, Azure, Google Cloud) E-commerce Technology (eg: Magento)User Interface Customisations Third Party Integrations User Experience & Interface Design Bespoke Customisations E-commerce Consulting Technical Support Modal Digital’s Value Chain COVID-19 impact ✘ ✘
- 22. Loss mitigation: ● Furlough employees (gov’t support) ● Cut contracts for unnecessary services ● Debt collection (push clients to pay bills) Modal’s Response Scan for Exaptive opportunities. ● What parts of our value chain can we reuse? ● They are using employees as probes! Watch this space! Act Sense Respond
- 23. “before human involvement, natural, low-intensity wildfires occurred every few years to burn up fuel, plant debris, and dead trees, making way for young, healthy trees and vegetation to thrive. That new growth in turn supports forest wildlife.” - www.worldwildlife.org
- 24. Prediction: a new wave of more resilient companies who are less susceptible to cash-flow & supply-chain shocks.
- 25. Macro: Economies & Societies
- 26. climate change legend threats people scholars NGOs firms gov’t Economic & Government responses emergency support unemployment benefits reduce interest rates Gov’t responses peoplefirms admin overheads reduced workforce covid-19 academics NGOs UBI? politicians anti-lockdown protests 2nd amendment support dividends?!
- 27. Innovation Happens at the Edge “Connect on similarities, benefit from differences” - Valdis Krebs
- 28. Economy and Society are fundamentally intertwined
- 29. The metrics we focus on greatly influence the behaviour of social systems.
- 30. $ ≠ Value source: Schwartz’s refined theory of basic human values
- 31. Is it time for new metrics?
- 32. If so, what behaviour will emerge?
Notes de l'éditeur
- This talk is heavily influenced by discussions I’ve had in these two networks I’m a part of. I’m going to: Introduce Dave Snowden’s Cynefin framework, and show you how it can be used Introduce Simon Wardley’s value chain mapping technique Spark a discussion of how the economic & social system may evolve at the macro level
- Do do this, I’ll start out with the very small.
- COVID-19 plunged us all into Chaos.
- In our house, stress levels rose as we: locked down a couple of weeks before the UK gov’t did. feared for the lives of our community & loved ones while trying to figure out what to do with our kids all day at home and deal with random panic buying and disrupted supply chains (food, not toilet paper) we kept on trying to work but worried about how we’ll survive when our companies go bust and we have no income because somebody would set our local cell tower on fire and the internet would die all the time watching the value of our investments dropping off the face of a cliff because the stockmarket’s crashed And then we started making plans.
- There’s a reason people panicked. It’s amygdala hijack kicking in to prompt some form of action. Any form of action. It doesn’t really matter what. (well, that’s not quite true) In chaotic systems: You Act first to stop the pain, bleeding, etc. Then you try and make sense of what’s happened. Then you decide what to do. Typically you arrive in the complex domain.
- To explain complex: a simple & relevant example from my personal experience…
- We were lucky enough to be able to WFH. with the kids. Stress levels are high (all the reasons) Opportunity for my daughter to whinge has never been higher! Obviously I want her to play rather than whinge. I tried all the carrots... time for the stick. Funnily enough, it worked!! (but not how you think) Simple example: Imagine how complicated this diagram would get if I layered on stress of furlough, lack of income, mortgages & landlords losing jobs, lack of excercise, risk of dying.
- The whole point of this small example is to show how complex human bahaviour is, even at the micro level. It constantly evolves There is no obvious predetermined link between cause & effect Execute multiple safe-to-fail probes. Learn from the results. Then stop the ones that don’t work, amplify the ones that do. Thanks to systems & complexity thinking, I’m able to work successfully at home and oversee my kids self-directed homeschooling.
- To summarise… In complex systems: You execute multiple safe-to-fail Probes first. Then you try and make sense of them. Then you decide what to do.
- Let's have a look at the micro
- We were lucky, many more were not.
- Companies filing for bankruptcy
- Evictions are on the rise in UK And presumably elsewhere… Impacts us directly, as we have a property business in Canada. One of our tenants operates a home daycare.
- explain system impact of covid-19 lockdown
- 1. If a tenant can't pay rent, Landlord has 2 options: Evictions are a reactive Chaos response Supporting tenants by reducing rent reduces loss of profit Bank response: Offer payment holidays (to some) Keep charging interest! This should be regulated away for benefit of landlords 3. Reducing interest rates: +’ve, -’ve 4. Governments are being squeezed. Not a long term solution!
- Cash Strong cash positions → more robust response, less chaotic Complementing gov’t support by topping up salary of furloughed employees Weak cash positions → panicked, more chaotic response High levels of debt lead to insolvency concerns Workforce not treated as well (layoffs, etc) Remote-friendliness Businesses more remote-friendly were in a natural position of strength Those that weren’t → prolonged chaotic response Existing fragility Companies with underlying issues such (Flybe, Debenhams, etc) Unveiled issues, exacerbated problems Prolonged chaotic response Secure More opportunistic response (complex)
- Modal are a perfect company to analyse They are a “remote-first” company, so ideally positioned to weather the COVID-19 storm! They have grown into a successful digital agency over the past decade Value chain mapping is simply a matter of identifying needs, and what those needs depend on.
- Their business model is already under threat, due to evolution at several levels of their value chain.
- Their customer’s needs have shifted thanks to COVID-19. reduced demand → loss mitigation behaviour Speeding up evolution to platforms
- Money is like blood to a company. In these times: You Act first to stop the bleeding. Then you try and make sense of what’s happened. Then you decide what to do.
- We are living through a forest fire.
- I’m banking on there being a new wave of more resilient companies who are less susceptible to system shocks as a result.
- There are many interesting signals. I’ve not yet pieced together a full picture. Values of the societies reflected in government responses. Italy suspended capitalism to protect its people. America’s leaders reluctantly locked down and are actively looking for ways to reopen. 1. Many worry gov’t are offering less support to people than firms. Concerns that bailout money given to firms will just be used to pay dividends, like in the GFC Tesco defends £635m dividend payout after coronavirus tax break 2. Growing calls for UBI (The Independent). Academics, politicians (SNP), NGOs, even Pope Francis - once left, not center 3. On the other hand, you have protestors fighting the lockdown Back to work: my economic freedom at risk ≥ vs pandemic slavery Protesters gather at Minnesota governor's mansion over lockdown, chant 'open up' Trump’s ”Liberate Virginia” tweet, supporting 2nd amendment. 4. All this with the looming threat of climate change impacting millions more lives than COVID-19 is likely to.
- Valdis Krebs points out… … not within the nodes. Diversity of connections improves quality of evolution. We tend to gather in small groups of like-minded people. Need to find ways to change that. Connect.
- Regardless of your political views.
- As Eliyahu Goldratt (theory of constraints) teaches us… They are an attractor.
- Money represents human value, it doesn’t define it. Value is much more complex than that.
- Exercise: Future Backwards session in Trios (With people you’ve never worked with!) At a Macro scale, discuss & map what likely heaven / hell scenarios will emerge in a post COVID-19 world?