What is dynamic complexity?

Peter Senge and John Sterman, both from MIT's Sloan School of Management, have written lucid explanations of dynamic complexity.

1. Here is an excerpt from Peter Senge's book "The Fifth Discipline" (pages 71-72). Finishing up a discussion of the cold war arms race between the U.S and Soviets, Senge writes:

"Interestingly, both sides failed for years to adopt a true systems view, despite an abundance of 'systems analysts,' sophisticated analyses of each others' nuclear arsenals, and complex computer simulations of attack and counterattack war scenarios? Why then have these supposed tools for dealing with complexity not empowered us to escape the illogic of the arms race?

"The answer lies in the same reason that
sophisticated tools of forecasting and business analysis, as well as elegant
strategic plans, usually fail to produce dramatic breakthroughs in managing a
business. They are all designed to handle the sort of complexity in which
there are many variables: *detail complexity. But there are two types
of complexity**.* The second type is * dynamic complexity*,
situations where cause and effect are subtle, and where the effects over time of
interventions are not obvious. Conventional forecasting, planning, and
analysis methods are not equipped to deal with dynamic complexity. Mixing
many ingredients in a stew involves detail complexity, as does following a
complex set of instructions to assemble a machine, or taking inventory in a
discount retail store. But none of these situations is especially complex
dynamically.

"When the same action has dramatically different effects in the short run an the long, there is dynamic complexity. When an action has one set of consequences locally and a very different set of consequences in another part of the system, there is dynamic complexity. When obvious interventions produce nonobvious consequences, there is dynamic complexity. A gyroscope is a dynamically complex machine; If you push downward on one edge, it moves to the left; if you push another edge to the left, it moves upward. Yet, how trivially simple is a gyroscope when compared with the complex dynamics of an enterprise, where it takes days to produce something, weeks to develop a new marketing promotion, months to hire and train new people, and years to develop new products, nurture management talent, and build a reputation for quality - and all of these process interact continually.

"* The real leverage in most management situations lies
in understanding dynamic complexity, not detail complexity*.
Balancing market growth and capacity expansion is a dynamic problem.
Developing a profitable mix of price, product (or service) quality, design, and
availability that make a strong market position is a dynamic problem.
Improving quality, lowering total costs, and satisfying customers in a
sustainable manner is a dynamic problem.

"Unfortunately, most 'systems analyses' focus on detail complexity not dynamic complexity. Simulations with thousands of variables and complex arrays of details can actually distract us from seeing patterns and major interrelationships. In fact, sadly, for most people 'systems thinking' means 'fighting complexity with complexity,' devising increasingly 'complex' problems. In fact, this is the antithesis of real systems thinking."

2. John Sterman, Leader of the System Dynamics at MIT's Sloan School of Management, discusses dynamic complexity in Chapter 1 of his Business Dynamics textbook (page 21):

"Most people think of complexity in terms of the number
of components in a system or the number of combinations one must consider in
making a decision. The problem of optimally scheduling an airline's
flights and crews is highly complex, but the complexity lies in finding the best
solution out of an astronomical number of possibilities. Such
needle-in-a-haystack problems have high levels of * combinatorial*
complexity (also known as

Dynamically complex systems frequently exhibit policy resistance, in which the system acts over time to counter policies intended to improve the behavior of the system. System dynamics helps us better understand the system and thereby find policies which the system will not resist.

Senge, Peter (1990) The Fifth Discipline: The Art and Practice of The Learning Organization. New York. Doubleday.

Sterman, John (1989) Modeling the formation of expectations: Misperceptions of feedback in a dynamic decision making experiment, Management Science 35(3), 321-339.

Sterman, John (2000) Business Dynamics: Systems Thinking and Modeling for a Complex World. Irwin McGraw-Hill