Industry development under conditions of complexity

Most economic development projects have a tendency to separate analysis from intervention or implementation. This follows on an engineering approach where you must first understand a problem or issue before you can design interventions which is then logically followed by implementation and later on evaluation. I will not now go off on why this logic is questionable as I have written about this before and we have dedicated the website to this topic.

But complexity thinking is challenging this norm of separating analysis and intervention.

Auwhere to gothors such as Snowden argues that under conditions of complexity, the best approach is to diagnose through intervention, which means that there is no real separation between diagnosis and intervention. Practically, you might have to spend some days and a little bit of effort to analyze who is interested in a particular issue so that you know where to start, but you have to recognize that even asking some simple questions is in itself already an intervention. Furthermore, the objective of working under conditions of complexity is to introduce more variety so that different approaches to overcoming constraints can be tried out simultaneously. This means that small portfolios of experiments must be developed and supported, trying many different ways to solve a problem. Many of these are guaranteed to fail, but new novelty will also arise. The health of a system depends on more options being proven viable. Strong alignment of interests, priorities and interventions are actually unhealthy for a system in the long run.

I’ve had this discussion many times with fellow practitioners in the last years and usually at some point somebody would say “but not everything is complex”. I agree. They would argue that there are definite casual relations between for instance education and economic development. Well, this may be true in some places. However, whenever a government (or a donor) decides that a particular sector or industry requires support it should assume that the issue is much more complex than it may appear, otherwise the industry actors and supporting organizations and demanding clients would have sorted things out by themselves.

The idea that diagnosis takes place during intervention has many detractors, despite the fact that many strong economic development organizations intuitively follows this process logic of working with diverse stakeholders in an ongoing process. Here is a short list of some of the detractors and their main reason for resisting such a process approach:

  • Large consulting firms: They would fight this approach as processes are much more difficult to quote and manage than a clearly defined project. Furthermore, this kind of approach depends on more expensive multidisciplinary experts that require a combination of technical, facilitation, change and business skills. The number of people that can support such a process are few and far in between.
  • The public sector: To overcome constraints created by complexity requires that dissent be nurtured and premature alignment be avoided. This is also risky for the public sector as things may not be so neat nor supportive of past policies and decisions. Furthermore, when more options are created it is not certain which firms will really take up the solutions – meaning that in a country like South Africa with strong benefit bias this is too risky, as preferred candidates might not be the beneficiaries of public support.
  • Donors and development organizations: Simple cause and effect interventions that depends on controlling certain inputs in order to benefit specific target groups still dominate the logic of donors. Therefore a process that is not specific, and that explores different alternatives may not be appealing to donors. Furthermore, donors are expected to be able to very precisely report not only in inputs, but also on impact. A process that has multiple shifting goal posts makes planning and resource management very difficult. However, many examples exist of donor supported projects that are very open to this approach, but this is mainly the prerogative of the programme managers deployed into the field – it is not systemic.
  • The private sector: Yes, even firms may resist an open ended and exploratory approach. One reason is that firms try to push the problems experienced in the private sector back onto the public sector (blame and responsibility shifting). An exploratory approach puts much more onus on the private sector to not only contribute, but to be open for alternatives and to then actively pursue opportunities that arise. Secondly, the incumbents in the private sector sometimes profits from a disorderly system. Many existing firms will resist newcomers trying different things and trying to create new markets, as this disrupts the way things are done at the moment. In a complexity sensitive approach we have to on purpose introduce novelty into the existing structures, and this means challenging some of the dominant views and agreements about what is going on, what must be done and why nothing has changed. This is very unsettling for the existing actors.
  • Top management in an organization: Management science in itself assumes many casual relations. For instance, strategy development typically starts with defining a vision and objectives, and then making sure that everyone is aligned and committed to these goals. As one of my favorite strategy David Maister argued  “strategy means saying no”. This means that resources are dedicated to a few specific areas in the belief that addressing these would have predictable and desirable effects.

Now I must state that in more ordered domains, where there is less complexity, many of the arguments outlined above are valid. In a small organization with limited resources priorities must be set. Governments cannot help everyone, so somehow a selection must be made. However, I believe that industry development is in many cases complex also because it is so hard to see how unpredictable effects will affect an industry.

I am grateful that I work with organizations that are willing to embark on industry development or institutional development processes that are more complexity sensitive. I believe that such an approach is particularly important for innovation systems promotion and for industrial policy. I am surprised at how many manufacturers and universities have agreed to embrace a more complexity sensitive approach to development, strategy formation and developing new services/products. All involved have been amazed at the early results this far, as these processes typically unleash a lot of energy and creativity by different stakeholders that in the past were more than willing to just observe from a distance what was going on.

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