Complexity and the limits of organizational growth
I had a discussion that prompted some thinking on my experiences in refactoring how various companies ship software and how the complexity of communication structures impacted that work. In particular, there are three “laws” that come into play when thinking through architecture, org makeup, and how you ship software. There may be others, but these are the ones that usually come to mind:
Gall's Law - states that attempts to build a complex system in one go will likely fail. "A complex system designed from scratch never works and cannot be patched up to make it work"
Conway’s law - states "[O]rganizations which design systems (in the broad sense used here) are constrained to produce designs which are copies of the communication structures of these organizations."
Brooks’ Law - states the truism that "Adding manpower to a late software project makes it later"
This lead to my first insight. A maxim, if you will, as a consequence of the above.
The Complexity Maxim:
Any complex organization is doomed to create only complex systems (Conway). Which, by definition (Gall) will fail. Ergo, complex organizations can only successfully maintain or extend existing complexity. Anything else a complex org attempts to do will result in failure.
Which led me to a second, more generalized set of thinking. The application of the 2nd Law of Thermodynamics to organizations.
The Entropy Law of Organizations:
An organization suffers entropy through gained complexity as it grows until that complexity consumes all available energy.
In other words, as an organization grows the internal complexity of its structures, communication, and operations inevitably increase until the cost of sustaining that complexity consumes all available capacity for growth. Beyond which the organization collapses. If an org were a star, it would have exhausted its nuclear fuel and begun a stellar collapse.
Even firing half the company will not work since the complexity is inherent in the company as an organism .. not the people. That likely just results in the org failing faster instead as it now produces less energy than required to maintain its state.
This also leads directly to the Innovators dilemma for such orgs as one means of organizational collapse. Market leaders in these famous examples are inevitably nearing maximum entropy when they needed to be able to respond to innovations, even their own.
Consequence
One consequence, mentioned above, is that a firm begins a collapse and eventually dies. That can look like the path in the innovators dilemma, a stellar collapse. The firm continually moves upmarket until at some point they reach a hard limit and can no longer do so. Entropy through sheer complexity is at the core of why a company has such a hard time shifting focus and even seeing the existential crisis coming. They literally don’t have the energy available in one place to take advantage of these new opportunities or make different decisions.
That can also look like brands who hollow out their own production, outsourcing to the lowest bidders (many times the same one), until the brand itself is just a marketing department attached to someone else’s business. The tool and PC industries have done this a thousand times over. That hollow shell will then have the value extracted (quickly) from the prior goodwill and get sold to it’s OEM once the shell has no more value.
There is at least one stable state in the process as well. Even post “stellar collapse”. You can become a financial firm. I have seen more than a few conglomerates and giant corporations become nothing more than a financial firm with a vestigial product division(s). GE followed this path.
