A theoretical and practical framework for managing complexity and its organizational and managerial implications

Abstract

Both academic and practitioners' literature are highlighting the importance of open innovation or more generally the requirement for organizations to source and interact beyond their structural organizational boundaries. The merit of doing so is widely discussed and literature provides success stories that underpin why such initiatives can substantially pay off and translate into competitive advantage. Academic organizational-, strategic- and managerial literature does provide answers which barriers must be overcome for organization that want to transition their business from closed to open innovation collaborative formats. However, from the practitioners there is a lack of understanding how all these elements are interconnected in a coherent framework and how they can be overcome by systematic intervention. Using the opportunity of this MBA thesis for the MBA program of Entrepreneurship & Innovation I want to address this phenomenon of the collaborative imperative (=collaboration as the new competitive advantage) from the natural scientific perspective of understanding complexity, deriving organizational and managerial implications and finally benchmarking the learnings against the business model of my current employer Climate-KIC, a trans-European innovation platform driving innovation in climate-change mitigation and adaption. The major findings are that a) the collaborative imperative is a natural consequence of the increased inter-connectedness of agents within and beyond the traditional structural boundaries of organizations; b) the increased complexity results in three major theorems (complexity trap, shift in power-structure and identity crisis). These theorems constitute the framework that all managerial decisions need to account for; c) the increased environmental complexity requires from organizations within their organizational setup to be able to at least reflect the complexity of the environment they are exposed to; d) organizations must be able to organize around functional groups and challenge-related teams based on a simple rule concept; e) in order for the individual actor to be sufficiently effective in such an environment traditional performance management concepts are counterproductive and fundamentally new forms of behavioural performance management concepts are required. This work is intended to serve as a naturally imperfect but practical guide for managers and innovation practitioners that face the challenge of transforming structure-based organizations into network-based organizations that are aiming to collaborate beyond their traditional structural boundaries as part of larger, highly interconnected networks in collaborative platforms.