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 / Second Quarter 1996 / Issue 3(originally published by Booz & Company)


Between Chaos and Order: What Complexity Theory Can Teach Business

When you combine the laws of chaos with the laws of order, what do you get? The answer is complexity theory, award-winning science writer David Berreby explains, and it is gaining acceptance in some quarters as a way of understanding how organizations should be managed. Previously confined to science and mathematics, complexity theory in its practical application emphasizes the ways in which a factory or a company resembles an ecosystem, responding to natural laws to find the best possible solutions to problems.

Work on complexity theory is centered at the Santa Fe Institute in New Mexico, and it was here that Mr. Berreby found the most lucid answers to his questions. It is a difficult concept, and has already taken its share of criticism including a Scientific American article asking “Is Complexity a Sham?” However, to Santa Fe Institute’s Stuart Kauffman, author of “At Home in the Universe: The Search for the Laws of Self-Organization and Complexity,” the theory has a strong claim because, as he says, “Life exists at the edge of chaos.”

Mr. Kauffman suspects that “the fate of all complex adapting systems in the biosphere - from single cells to economies - is to evolve to a natural state between order and chaos, a grand compromise between structure and surprise.” In looking at organizational, technical and industrial problems, therefore, Mr. Kauffman suggests it may be possible, using models developed for evolution, to find a signal of corporate success - a pattern indicating a corporation is finely poised between order and chaos. With its hint of universal law, complexity theory certainly appeals to the imagination.

The problem: after truck bodies trundle off the assembly line at the General Motors Corporation plant in Fort Wayne, Ind., how do you get them painted with the least expenditure of material and time?

The standard approach, applied at plants all over the world, is a plan that routes each truck to a line in front of numerous tunnel-like passages, where spray guns cover it with coats of paint. A centralized controller keeps track of where every truck is going and coordinates the routing with the use of different colors by each paint station. The highly interconnected system works fine as long as nothing goes wrong; but once any part of it stumbles, it throws off the workings of everything else.

In Fort Wayne, though, there is no such plan and no such risk--thanks to a developing school of thought about how organizations work that has broad implications for companies and their managers.

Each of the 10 paint modules in the G.M. plant is operated, instead, as a free agent by a computer whose program has a simple goal: paint as many trucks as possible, and use as little paint as possible. Without regard for what any of the other paint booths are doing, or what else is happening in the plant, each booth makes an electronic "bid" for each truck, and the job always goes to the lowest bidder.

If the line in front of a booth is long, it bids zero--signaling that it is not trying for more work. If it has capacity, it bids either high or low, depending on how much capacity. In a microsecond, all the bids are in and the modules' computers, akin to players in a poker game, compare them and assign the truck to the "winner." In the case of a tie, the nearest low bidder gets the job. The game even extends inside the modules, to the operation of the computer-controlled spray guns.

Like a market sorting supply and demand through the actions of individual traders, the system of self-interested modules quickly evolved a pattern for painting trucks that saves G.M. $1.5 million a year over the standard approach, according to Howell Mitchell, an engineer at Flavors Technology, the New Hampshire consulting firm that designed the system. And if G.M. institutes major changes in the way the assembly line produces truck bodies, or changes the ratio of black trucks to white, no planner need go back to the drawing board to redesign the painting operation. The modules, each one still trying to maximize its success, will collectively evolve the best new pattern on their own, says Richard E. Morley, Flavors's president, who conceived the system. On line in Fort Wayne since 1990, the system is being considered by G.M. and other auto makers for a number of other plants.

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