Structural Change A Cornejo 2007

Complexity Management
through
Structural Change ©
By Alfonso Cornejo
Author of the Book
Complexity and Chaos:

A Guide for XXI Century Management
Old Today s organization is being trapped
within past paradigms that prevent it
paradigms to be more flexible and dynamic.
In past years organizations have
unsuccessfully sought the formulas
that would allow them to survive in a
competitive environment which is
every day more dynamic and
disorderly.
However, changes have been partial

and organizations haven’t been able
to adapt the business essence
according to the new and incremental
environmental demands. In spite of
everything, we know the in the 21st
Century organizations should learn to
evolve and adapt their structures in
this new environment if they want to
stay within the competition arena.
September 2007 Alfonso Cornejo CM~SC © 2
Environment pressures that
demands continual adaptation
Industry dynamics
Technological change
Required performance
Globalization
Cost Control
Competitors
Customer
ever changing needs
Profit Goals
Economical cycles
Competitiveness standards

Organizational
Complexity

 New paradigm to understand the

dynamic of organizational
processes.
 Powerful approach to ensure high
performance and adaptation of
corporation.
 As a result of structural change,
organizational behavior improves.

CEMEX Case
Complexity Bordering on Chaos
There are stranger places to see the
latest in complexity theory in action, but
Applications delivering cement in Mexico is a

pretty good start.
By Peter Katel
Arie de Geus Kees Van Der Heijden Scenario Planning

Living Company Scenarios Interactive
James Moore Peter Schwartz Management
Strategy The Death of Competition The Art of the Long View
Margareth Wheatley SPM Structural

Leadership and New Science Archetypes Change
Organization Michael Mc Master
Intelligence Advantage
Peter Sengue
Processes Genetic Algoritms

Stuart Kauffman JOHN DEERE
Kevin Kelly CEMEX
Metaphors Principles Applications

Complexity
Do we look desorder......?
• Conflict
• Lack of priority
• Flaws
• Misalignment
• Limited resources
• Entropy
...or the Order behind Desorder......?
• Structures
• Behaviors

Complexity
The complexity and chaos that live within the organization is not
a dice game, the situations leading to chaos are perfectly
predictable if we pay close attention to those variables that tend
either to increase or diminish them. We will mention a typical
situation: One company acquires a new and numerous standardized
truck fleet from only one supplier for the delivery of their
products. To accomplish the repairs, parts handling, and spare
parts control, it requires ability and learning development that
must be accumulated by the team of people that is in charge of the
product distribution technology.
Two years later, due to the obligations that a top executive has,
a great amount of units is bought again, but from a different
supplier. Comments are not needed to know that the required effort
within the organization for the management, tracking and control
of, although apparently two similar technologies, needs an
abundant waste of energy, an additional talent display and a more
complex management for a situation that had already been
stabilized.
¿How to deal with every day
Complexity ?
7 8 1 1 5
12 10 3 5 4
9 9 7 7 ......
•
•
•
•
•
•
•
Low sales...
Rejected products...
Production delays...
Unsatisfied Customers....
Fails on communication.....
Demotivated people ....
Hurries.....
? ?
• Etc....

.
Types of Complexity
a) Origin Complexity:
Due to original company characteristics,
by example. 3M (innovation) vs Budweiser
(logistics).
b) Residual Complexity:
Related with the everyday operation of
the system, i.e. conflict, orders
cancelation, lack of raw material,
personnel, turnover, etc.
c)Provoked Complexity:
Generated by particular, political or
ego center decisions instead of group
consensus, i.e. to acquire wrong
technology, to make inadequate
executives selections, to launch to
market new products based on incomplete
analysis, etc.
May 2001 Alfonso Cornejo Alvarez CM~SC © 10

Effect of a bad decision

System Capacity to Manage
Complexity
Everything that happens within the organization consumes energy
and it must be taken into account that the energy must be dosed
and not be used indiscriminately. Making efficient and effective
use of the resources is translated in the capacity to properly
manage the complexity of the situation.
In order to manage complexity the proper capacity is required

(Variety and Ability) from each element to attend the system
demand.
The System Capacity is optimum when the emergent properties are

properly made use of.
When the system components do not fulfill their roles and their
functional expectations about them excess pressure is generated
in the system which manifests itself in an efficiency and
effectiveness loss, reducing the parts’ orientation because of
the secondary effects that are provoked.
Complexity is a very particular situation reality that we must
understand and manage. Its proper management requires several
observers (which form part of the complexity) that share the
“Shared Map” reality in order to understand and manage it.

System Capacity to Manage
Complexity

Structure–Process Model
“SPM”
Need of alternative
perspectives
Improvement approaches have come and gone and still it seems that
we are unaware of the possible effects of our acts, we don’t have
identified levering points nor the key variables to manage the
organization conduct. All of this is due to the fact that many
tools have been developed (with great improvement potential) to
attack in an isolated and independent way parts of the system.
Nevertheless, as any other strong drug, we forget the lateral
effects when applying the antidote, and all this in non
controlled situations may be delicate for the organization.
In fact it is still common practice to attack the symptoms of the

problematic in the organizations without properly questioning if
we have reached the bottom of the situation. We haven’t realized
that everything that happens within the organization is
interconnected and when we attack one variable it generates
effects in other parts of the system. If this is not taken care
of, we can lose control of the system.

Need of alternative
perspectives
Also, it has been common practice to try to improve an
organization from within its processes and not from its
structure, when the latter is the one who generates the rules for
possible actions to the processes. We had mistakenly searched
attacking the chaos and organizational complexity through
improvement processes without questioning which structures were
generating the disorder.
After all, what is the organization?, but a chess board where the
figures live through events under certain rules and a squared
board. On one hand, the board and the game rules are at the same
time the structure that defines the game to be played and its
possibilities, and on the other hand, the processes are the place
that are gradually generating the system’s dynamic. And here is
where the cycle ends because when the processes occur gradually
they modify little by little the structure of the system, just
like the water drop that graves the hardest rock as time goes by,
and deforms it by the effect of a repetitive event.
.

The Need for a Model of
...are the result of
different interacting
structures, forms,
patterns
Relations, paradigms,
principles, etc.
We can separate
current situations
that we observe and
live in a model of
polarities:
1.- Complex conducts

Organizational 2.- The variables that
Behavior and Conducts... generate these complex
behaviors

Structure – Process Model
and Chess...
Rules of the Game

Characteristics
of pieces
Board
Plays &
Possibilities
Relationships
between pieces

Which set of structures
generate the processes?
Structures Processes
S1 P1
S2
S3
P2
S4
S5
S6 P3
S7

Structure – Process Model (SPM)
Environment Environment
Structures Struct Proc Processes
System Frontier

Structure – Process Model (SPM)
System Frontier
Structure and Processes is a universal duality; it is the form and

function. Is the dancing relation of two virtual poles with dynamic
movement for any system at any level of the universe, from the atom
up to galactic cumulus. One requires from the other to exist, and
since there are no processes if there is no structure, nor
structure without processes. We can imagine the structure-processes
model as two separate entities but united through bonds which
connect both and are used to feedback their effects and modify
their form through time.

(SPM)
On how many repeated occasions we were faced trying to
implant a change in an organization, whether is called
quality program, leadership, productivity, team work, etc.
(processes). The problem is that we never were aware that
we were trying to change the organization.
Now it is clear that in the majority of cases is not

possible to modify processes attacking the processes. It
is necessary to adjust, create or modify the structure
(may be policies, procedures, game rules, roles, etc.) in
order to provoke the emergence of processes required by
the organization. This is why it is important to discover
the system natural levering points, that is, places where
we can stimulate the variable with a minimum effort and
great results can be achieved.

(SPM)
Chaos, complexity, lack of control, are concepts which we have been exposed to without
knowing what produces them. Understanding the organizational dynamic seems to be
unreachable because the quantity of dynamic variables involved and the quantity of
possible states that are generated. Nevertheless, The Structure-Process Model allows us
to see things from a different viewpoint, it allows us to step further into the Chaos
and Complexity Management, in a world where the multiplicity of states darkens our
vision and hinders our way to the predictability of future events.
Some of the most important principles and properties of The Structure-Process Model are
the following:
•The system’s structure generates its own processes

•The processes through time modify the system’s structure, rising this way another
structure... which generates another kind of processes...and so on.
•Changes in the Structure modify the processes and in the same way even the minimal
change in processes has an effect on the structure.
•Solid and aligned structures allow controlled processes. If the structural elements
lack solidity then it will be easier that the processes modify the structure.
•The greater influence actors can modify the structure and the processes in order to
achieve the stability level that satisfies the interests of the groups with greater
influence on the system.

3 Levels (organization)
Structure Process Organizational
Structure Process Cultual
Structure Process Individual

Structure-Process Model
Organization level
S P Organization
S P Culture
S P Individual
S P
Culture
One of the most important phenomena yet not defined
but which we can understand under the Structure-
Process Model is that of the Organizational Culture.
This variable has always been extremely complex to

comprehend and because of that there is a great
number of definitions trying to structure it under
different criteria and viewpoints, all of them valid
and rich in possibilities for its analysis.
However, I’m convinced that the organizational

culture contains both elements of duality and from
this perspective it may be perfectly understandable
for managing it within the organization, and in this
way it may not be seen as a caprice of human groups
who exchange ideas, values and conduct codes to rule
the behavior which characterize it.

Cultural level
S P Organization
S P Culture
S P Individual
S P
Individual level
S P Organization
S P Culture
S P Individual
S P
Structural
Change
Design
One crucial point for any system its
his own design, because it is
precisely at this moment in which its
structure is molded and defined and
so, the capacity to trigger the
possibilities in its processes are
created.
The possibilities from whether the

organization will be successful or not
depend from now on. In fact a badly
designed system is a costly system to
manage, because it is a system where
the entropy starts to grow without
measure and eventually it may make the
organization lose its capacity to
create positive cycles.
I. Current Situation
Observed environment: competitive

environment characteristics that
affect organizational dynamics.
Diagnostic of current
observed processes.
Structures that
generate the current
processes Current situation

II. Desired Situation
Change Perspectives: Environmental

Trends and new Change Perspectives
that trigger new organizational
atitudes and behaviors
Profile of required
processes in order to
maintain competitive
edge.
Structures required
are identified to
support the new Desired situation
organizational
processes.

III. Structural Change S P
Detailed action plan in order to

implement Structural Changes
required, involving different
organizational areas (Technological,
Administrative, Cultural and Human).
Required changes are implemented

to ensure the appearing of new Structural Change
organizational process, and as a
consequence, desired behaviors and
patterns emerge.

IV. Learning
New processes and behaviors are

observed and measured in operation in
order to detect effectiveness of
Structural Change previously planned.
A learning about the performance

of processes is carried out,
Structural adjustments are made,
and a new stage for organizational Learning
adaptation is established..

Organizational Complexity
Among other things, the Structure- Process Model may support the
organization with:
– Environment Analysis and its repercussion on the Organization
– The diagnostic of the organization as a whole, as an Open
System and exchanging energy and information with its
Environment.
– Its capacity to adapt to its Environment.
– Evaluate its structures vs. its “the must be” state
– Evaluate its fundamental processes.
– Evaluate the Organization Chronological Age as a function of
the rigidity of its Structures.
– Detect the greater influence Structures within the
Organizational Culture.
– Detect how the Culture influences different Processes types
within the Organization and how it affects the Organization
Structures.
– The Organization Attractor effect: Vision

The importance of Design
“All the organizations are perfectly

designed to obtain the results that they
generate”

System frontier
If there is not Structural Change

there won’t be significant and
lasting change.......

The Book
Complejidad y Caos: Guía para la
Administración del Siglo XXI
Complexity and Chaos: Guide for XXI Century

Management
You can download or read the book here:
www.structural-change.com
http://www.eumed.net/cursecon/libreria/2004/aca/aca.htm

Alfonso Cornejo
tektology@yahoo.com
www.structural-change.com
www.structural-change.jimdo.com

Structural Change A Cornejo 2007

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Complexity Management

Complexity and Chaos:

However, changes have been partial

September 2007 Alfonso Cornejo CM~SC © 3

September 2007 Alfonso Cornejo CM~SC © 4

 New paradigm to understand the

September 2007 Alfonso Cornejo CM~SC © 5

Applications delivering cement in Mexico is a

Arie de Geus Kees Van Der Heijden Scenario Planning

Margareth Wheatley SPM Structural

Processes Genetic Algoritms

Metaphors Principles Applications

September 2007 Alfonso Cornejo CM~SC © 6

...or the Order behind Desorder......?

September 2007 Alfonso Cornejo CM~SC © 7

September 2007 Alfonso Cornejo CM~SC © 9

May 2001 Alfonso Cornejo Alvarez CM~SC © 10

May 2001 Alfonso Cornejo Alvarez CM~SC © 11

In order to manage complexity the proper capacity is required

The System Capacity is optimum when the emergent properties are

September 2007 Alfonso Cornejo CM~SC © 12

September 2007 Alfonso Cornejo CM~SC © 13

In fact it is still common practice to attack the symptoms of the

September 2007 Alfonso Cornejo CM~SC © 15

May 2001 Alfonso Cornejo Alvarez CM~SC © 16

1.- Complex conducts

September 2007 Alfonso Cornejo CM~SC © 17

Rules of the Game

September 2007 Alfonso Cornejo CM~SC © 18

September 2007 Alfonso Cornejo CM~SC © 19

Structures Struct Proc Processes

September 2007 Alfonso Cornejo CM~SC © 20

Structures Struct Proc Processes

Structure and Processes is a universal duality; it is the form and

September 2007 Alfonso Cornejo CM~SC © 21

Now it is clear that in the majority of cases is not

September 2007 Alfonso Cornejo CM~SC © 22

•The system’s structure generates its own processes

September 2007 Alfonso Cornejo CM~SC © 23

Structure Process Organizational

Structure Process Cultual

Structure Process Individual

September 2007 Alfonso Cornejo CM~SC © 24

This variable has always been extremely complex to

However, I’m convinced that the organizational

September 2007 Alfonso Cornejo CM~SC © 26

The possibilities from whether the

Observed environment: competitive

September 2007 Alfonso Cornejo CM~SC © 31

Change Perspectives: Environmental

September 2007 Alfonso Cornejo CM~SC © 32

Detailed action plan in order to

Required changes are implemented

May 2001 Alfonso Cornejo Alvarez CM~SC © 33

New processes and behaviors are

A learning about the performance

September 2007 Alfonso Cornejo CM~SC © 34

September 2007 Alfonso Cornejo CM~SC © 35

“All the organizations are perfectly

September 2007 Alfonso Cornejo CM~SC © 36

Structures Struct Proc Processes

If there is not Structural Change

September 2007 Alfonso Cornejo CM~SC © 37