This website or its third-party tools use cookies which are necessary to its functioning and required to improve your experience. By clicking the consent button, you agree to allow the site to use, collect and/or store cookies.
Please click the consent button to view this website.
I accept
Deny cookies Go Back

Intelligent Management

Deming and Theory of Constraints for CEOs and Executive Teams for the Age of Complexity. Ess3ntial Critical Chain Project Management

  • Home
  • about us
    • the founders
    • Dr. Domenico Lepore
    • Intelligent Management Success Stories
    • Our Books
    • Clients
    • Expanding Spiral of Positive Systemic Results with Intelligent Management
  • Decalogue Methodology
    • Decalogue Methodology for Whole System Management
      • How to adopt systemic organization management
    • Management Must Evolve Fast – 15 Days to Radically Improve Company Performance
    • 10 Steps for Transformation
    • Systemic Organization Management
    • Resource Library for Systemic Management
    • Our Education Modules for Systemic Management
  • Contact
  • Our Whole System Blog
  • Intelligent Management Italia
You are here: Home / Uncategorized / Network of Networks (continued): The Intrinsic Risk of Super Hubs

Jan 19 2012

Network of Networks (continued): The Intrinsic Risk of Super Hubs

When an enterprise is successful and grows in size, there is inevitably an increase in the number and quality of interdependencies, i.e. exchanges with other parts of the network of enterprises it is part of. These can include information, money, manpower, and goods etc. This leads to a double level of complexity: one level is the configuration of the links within the network, and the second level is the dynamics of the links. This increased complexity may lead to the formation of hubs, i.e. a node of the network that has a very large number of connections to the other nodes.

In this situation, the unavoidable fluctuations in the performance of a hub (or enterprise) propagate through its links to the other connected nodes. This may have a cumulatively negative domino effect.

For example, a successful company may become a leading economic player, directly or indirectly, for the whole economy of a local community or city. With the growth of the company, more and more economic activities become related/connected to it. Should this leading company fail, its collapse will drag the other related industrial activities with it, and subsequently the less related activities, until the very existence of the community itself is threatened. Imagine, for instance, the life of New York city should Goldman Sachs implode.

How can we avoid a network catastrophe?

To avoid this possibility, the focus should be on regulating the system so that the network that connects all the economic activities has the following characteristics:

  • stability
  • goal orientation

How do we achieve stability? Stability means that the negative fluctuations in the economic performances of each element of the network are prevented from propagating to the rest of the network. In other words, the presence of hubs is controlled and regulated. This requires a political, economic and legal effort from the community. Where no control or regulation is created, the risk of a catastrophe is always present.

It should be clear that the goal of the law should not be to clamp growth. There is nothing wrong in companies growing and becoming more successful. The goal of the law should be to make the whole network grow sustainably so the hub can remain a hub without breaking the network. Allowing one hub to grow out of proportion to the other nodes of the network is a threat to the entire network, including the major hub itself.  Science, through the understanding gained by network theory,  provides us with knowledge that was not available 20 yeas ago. For this reason, science should inspire and inform the new legislation required for the growth of networks.

Goal orientation means that the network, instead of being allowed to develop in a random manner, is driven toward the optimization of a goal. This goal must be the one that the community, in general, wishes to achieve. The goal could be simply the preservation of the network, or, for instance, an increase in living standards, an increase in sustainable wealth,  and an increase in attention to the environment. Once again, this requires a political, economic and legal effort from the community, but the specter of a network catastrophe must be addressed.

Not just catastrophe – positive systemic repercussions

There is no doubt that the prospect of economic gain is often the catalyst for major change. This can be the driving force behind introducing the kind of control and regulation of a network of networks required to avert catastrophe. However, even if the primary drive behind a systemic and network-oriented management of economic activities may be  economic, the effects and gains can be much wider. An increase in revenues within a network implies a comparable increase in wealth for all the stakeholders of that network. Consequently, there will be a demand for improved education and healthcare. This will be followed by  the demand for an increase in cultural and recreational activities. All of this growth will have a profound, positive impact on the overall quality of life of the entire community. After all, we know only too well what it means to be without the cascading positive effects we’ve just described. We’ve been living through it for the last 5 years.

The science of equality

What network theory is making clear to us is that the effort to create greater equality among enterprises is not just an ethical pursuit. It is a matter of good science. Equality  in this context means a well defined range of ratios between the importance of hubs and nodes so as to prevent the explosion of an entire network. We should pursue equality among enterprises not necessarily because we believe it is good, but for a physical, scientific reason. Science is pointing the way to a new body of ethics. However, to bring this knowledge into the realm of law and management requires a different kind of use of the mind, and that requires a different kind of intelligence – a systemic intelligence capable of perceiving the systemic implications of our actions. The cognitive tools to foster and develop this kind of intelligence exist, and the sooner they are acquired the more sustainable and positive our future will be.

See also ‘Network of Networks: Avoiding Catastrophe Through a Systemic Vision of Enterprises’

Written by angela montgomery · Categorized: Uncategorized · Tagged: complexity, economics, ethics, innovation, intelligence, interdependencies, interdependencies. education, Network Theory, new economics, Science, sustainable, systemic, Systems Thinking, Thinking Process Tools

Search Form

Comments

  1. Ronald L Dick says

    January 22, 2012 at 7:15 PM

    Hi Angela
    Even though your point is well received, I do not agree that governmental controls/regulations would be a viable answer to create a sustainable business network. Would tend to think there is a need to train our next generation of business men and women to think in more “systemic terms”, so that they will not only be cognizant of the interdependencies of a large chain of business network hubs, but the effects of decisions/actions to even the smallest of independent business ventures, whereby the failure of a singular product/service could possibly have catastrophic consequences for all products and or services offered for one small venture.
    Best regards,
    Ron

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Sign up for our Blog and receive our White Paper ‘Out of the Crisis – A New Kind of Science for Management’

Sign up for our blog here to receive all our blog posts by e-mail.

Search Form

Recent Posts

  • Effective Decision-Making? Understand Your Driver Needs First March 6, 2021
  • Why Is Managing Change So Hard and How Can We Make it Easier? February 25, 2021
  • Creating Connections Between Company Functions – Back to Deming February 19, 2021
  • Human Resources – a New Perspective for Our Post-Pandemic World February 10, 2021
  • What’s Driving Profitability in Your Business and What Isn’t – How to Find Out February 3, 2021
  • Business, Politics, Wall Street: the Learning Organization and Our Interconnected Future January 29, 2021
  • What Does it Take to Be a Leader in Today’s Complex World? January 21, 2021
  • A New Economics for Sustainable Prosperity – Out of the Crisis Series Part 7 January 13, 2021
  • Identifying Assumptions to Unlock Innovation and Move Beyond the Crisis – Out of the Crisis Series Part 6 January 6, 2021
  • Learning to Think Systemically to Make Informed Decisions and Pre-empt a Crisis – Out of the Crisis Part 5 December 30, 2020
  • How to Manage Decentralized Work – Out of the Crisis Series Part 4 December 23, 2020
  • Vital Insights from Managing Variation and Constraints – Out of the Crisis Series Part 3 December 16, 2020
  • What’s Wrong with Organizational Structure – Out of the Crisis Series Part 2 December 9, 2020
  • A Serious Knowledge Gap Affecting Leaders and Executives – Out of the Crisis Series Part 1 December 2, 2020
  • How to Prevent Chaos in Any Project or Initiative November 26, 2020

Social Icons

  • Facebook
  • Google+
  • RSS
  • Twitter

Archives

  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • March 2014
  • February 2014
  • January 2014
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • March 2013
  • February 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011

Recent Posts

  • Effective Decision-Making? Understand Your Driver Needs First March 6, 2021
  • Why Is Managing Change So Hard and How Can We Make it Easier? February 25, 2021
  • Creating Connections Between Company Functions – Back to Deming February 19, 2021
  • Human Resources – a New Perspective for Our Post-Pandemic World February 10, 2021
  • What’s Driving Profitability in Your Business and What Isn’t – How to Find Out February 3, 2021

Connect with us on LinkedIn and Twitter

  • LinkedIn
  • Twitter

Sign up for our blog

  • Home
  • Blog Theory of Constraints & Deming
  • Library
  • How to adopt systemic organization management
  • Knowledge Base for ‘The Human Constraint’
  • Contact Us

© 2020 Intelligent Management Inc. Canada

Privacy Policy