1. SCA PACKAGING 1 Presentation/Date/Initials Why Complexity Science Is So Important to Business Today and Why It Is So Difficult to Get this Message Across Potentials of Complexity Science for Business, Government and the Media August 3 – 5, 2006 Budapest Richard L. Sanders

2. SCA PACKAGING 2 Presentation/Date/Initials Business Is Changing Rapidly

3. SCA PACKAGING 3 Presentation/Date/Initials What Is Contributing to this Change?

4. SCA PACKAGING 4 Presentation/Date/Initials Present Business Paradigm

5. SCA PACKAGING 5 Presentation/Date/Initials Always Change a Winning Team

6. SCA PACKAGING 6 Presentation/Date/Initials There Is Hope: the Calvary Is on the Way

7. SCA PACKAGING 7 Presentation/Date/Initials A man was walking home one dark and foggy night. As he groped his way through the murk he nearly tripped over someone crawling around by a lamp post. "What are you doing?" asked the traveler. "Im looking for my keys." Replied the other. "Are you sure you lost them here?" asked the first man. "Im not sure at all," came the reply, "but if I havent lost them near this lamp I dont stand a chance of finding them."

8. SCA PACKAGING 8 Presentation/Date/Initials Until recently science has been restricted to the illuminated area, but the advent of computers and the internet has made it possible to explore the shadows and further. A new light is being switched on that is resulting in a paradigm shift that can facilitate future growth and prosperity.

9. SCA PACKAGING 9 Presentation/Date/Initials Stages of an Enterprise This picture and those marked by MT used with the permission of the MT Taylor Corporation

10. SCA PACKAGING 10 Presentation/Date/Initials System A system is a set of dynamic, interacting elements, organized for a goal.

11. SCA PACKAGING 11 Presentation/Date/Initials Closed System A closed system is one that is isolated from its environment. This kind of system uses its own internal reserve of potential energy, and as reactions take place, entropy rises irreversibly to a maximum. Thermodynamic equilibrium is reached, and the system can no longer produce work.

12. SCA PACKAGING 12 Presentation/Date/Initials Open System An open system is one in permanent interaction with its environment, with which it exchanges energy, matter and information. Because of the energy flow through the system and the dumping of used energy into the environment, its entropy is maintained at a relatively low level. This system is capable of performing work.

13. SCA PACKAGING 13 Presentation/Date/Initials Complex System Large variety of elements. Elements organized in hierarchical levels. A high concentration of connections between the elements. The interactions between the elements are nonlinear.

14. SCA PACKAGING 14 Presentation/Date/Initials Positive Feedback Positive feedback loops contain the dynamics for change in a system, growth and evolution.

15. SCA PACKAGING 15 Presentation/Date/Initials Positive Feedback

16. SCA PACKAGING 16 Presentation/Date/Initials Example

17. SCA PACKAGING 17 Presentation/Date/Initials Negative Feedback Negative feedback loops represent control and stability, the establishment of equilibrium and self-maintenance.

18. SCA PACKAGING 18 Presentation/Date/Initials Negative Feedback

19. SCA PACKAGING 19 Presentation/Date/Initials Example

20. SCA PACKAGING 20 Presentation/Date/Initials Combination of Positive and Negative Feedback This is commonly occurring behaviour, rapid growth followed by stabilisation

21. SCA PACKAGING 21 Presentation/Date/Initials Combination of Positive and Negative Feedback

22. SCA PACKAGING 22 Presentation/Date/Initials Example

23. SCA PACKAGING 23 Presentation/Date/Initials The Dynamics of Maintenance and Change The properties and behaviour of a complex system are determined by its internal organisation and its relationship with its environment.

24. SCA PACKAGING 24 Presentation/Date/Initials The Dynamics of Maintenance and Change (Continued) Every system has two fundamental modes of existence and behaviour: maintenance and change. The first, based on negative feedback loops, is characterised by stability. The second, based on positive feedback loops, is characterised by growth (or decline). The coexistence of the two modes is at the heart of a complex system

25. SCA PACKAGING 25 Presentation/Date/Initials Homeostasis: Resistance to change Formally: The ability or tendency of an organism or cell to maintain internal equilibrium by adjusting its physiological processes.

26. SCA PACKAGING 26 Presentation/Date/Initials Homeostasis: Resistance to change Informally: A homeostatic system (an industrial firm) is an open system that maintains its structure and functions by means of a multiplicity of dynamic steady states rigorously controlled by interdependent regulation mechanisms. Such a system reacts to random changes in the environment to maintain stability.

27. SCA PACKAGING 27 Presentation/Date/Initials Evolution For a complex system, to endure is not enough; it must adapt itself to time dependent changes in the environment and evolve. Otherwise outside forces can disorganise and ultimately destroy it. A key to unlocking this apparent paradox can be found in diversity.

28. SCA PACKAGING 28 Presentation/Date/Initials Natural Selection Occurs by random mutation Much too slow to explain speed of evolution

29. SCA PACKAGING 29 Presentation/Date/Initials Sharing of DNA Gene pool required: (the richer, the better) Sharing of genes: (sharing ideas, resources, etc.)

30. SCA PACKAGING 30 Presentation/Date/Initials Homeostasis vs. Evolution

31. SCA PACKAGING 31 Presentation/Date/Initials Diversity The law of requisite variety from Ross Ashby (1956) states that the regulation of a system is efficient when it depends on a system of controls as complex as the system itself. Variety permits a wider range of response to potential forms of aggression. Variety also produces the unexpected, which is the seed of change.

32. SCA PACKAGING 32 Presentation/Date/Initials Auto Catalytic Behaviour

33. SCA PACKAGING 33 Presentation/Date/Initials Reactions (e.g. Chemical) MT

34. SCA PACKAGING 34 Presentation/Date/Initials Reactions Without catalysis: (A + B = AB) With catalysis: (A + B + C = AB + C)

35. SCA PACKAGING 35 Presentation/Date/Initials Auto catalysis TM

36. SCA PACKAGING 36 Presentation/Date/Initials Auto catalysis Catalysis BA: A + B + BA = AB + BA Catalysis AB: A + B + AB = BA + AB

37. SCA PACKAGING 37 Presentation/Date/Initials Under certain conditions this auto catalytic process can lead to exponential growth, for instance the exponential growth of the compound AB.

38. SCA PACKAGING 38 Presentation/Date/Initials Emergence of Auto catalysis TM

39. SCA PACKAGING 39 Presentation/Date/Initials Four Zones of Auto catalysis TM

40. SCA PACKAGING 40 Presentation/Date/Initials Four Zones Zone 1: much diversity but little interaction. Zone 2: a lot of interaction but little diversity. Zone 3: too little diversity and interaction. Zone 4: the right balance.

41. SCA PACKAGING 41 Presentation/Date/Initials Connectivity

42. SCA PACKAGING 42 Presentation/Date/Initials Boolean Networks TM

43. SCA PACKAGING 43 Presentation/Date/Initials Three Modes of Behavior Chaos: too much connectivity (random changes can cause avalanches of change; positive feedback) Order: too little connectivity (random changes are damped and system returns quickly to ordered state; negative feedback) Edge of Chaos: right balance between positive and negative feedback leading to adaptation of the network

44. SCA PACKAGING 44 Presentation/Date/Initials Two Necessary Conditions for Evolution Right level of diversity. Right level of connectivity.

45. SCA PACKAGING 45 Presentation/Date/Initials Interlude

46. SCA PACKAGING 46 Presentation/Date/Initials The New Paradigm

47. SCA PACKAGING 47 Presentation/Date/Initials DC3?

48. SCA PACKAGING 48 Presentation/Date/Initials F16?

49. SCA PACKAGING 49 Presentation/Date/Initials What Kind of Company Do You Want?

50. SCA PACKAGING 50 Presentation/Date/Initials Complexity Science and Business

51. SCA PACKAGING 51 Presentation/Date/Initials Stages of an Enterprise This picture and those marked by MT used with the permission of the MT Taylor Corporation

52. SCA PACKAGING 52 Presentation/Date/Initials Conclusion