Technologically speaking, Red Bull has developed the best car for the championship. This assertion is related to the performance of the car, and then, Red Bull deserves the constructors’ championship. But we can think about another issue: Is Vettel better driver than Alonso?

The last race cannot give us an answer because the engineers of Ferrari are responsible of a big error in the last race. But, if we want to be right, the real reason was a problem of complexity. Complexity depends on two factors: structure and uncertainty, and the more complex situation the more difficult decisions.

Ferrari was waiting for an untroubled race. The team can control a set of variables related to the technology integrated in the car. The initial position and the condition of the car let to predict a good result for Ferrari, but then something unexpected occurs (a safety car). The behavior of the race change suddenly, because there is a set of competitors that decide enter the pit to change the tyres, they will lose their positions but they will not waste much time to do it.

The set of possibilities now is bigger; engineers control timings, the degradation of the tyres and so on. The uncertainty related to these control variables is the same, the final position will continue depending on these variables, but the model to analyze has changed.

In this situation the decision maker has a more difficult task, because the behavior of the system is more complex. If the decision maker does not take into account this change, he can make a mistake.

This example can illustrate the mechanism of complexity in a business. A Formula 1 race is not especially complex: engineers control timings, fuel, degradation of the tyres, the speed and position of rivals, and decide when the driver must enter the pit. All this variables has a certain level of uncertainty, but as we have seen, suddenly the model of the race can change because of external factors and it becomes more complex, although we have all the variables under control.

In our business, we can control a set of financial ratios, but, can we detect an external sudden change in the business model? Can we measure the complexity of a business?

Today, we can do it, because there are tools to measure the complexity of a business. If you do not know them, it is possible that your business finish as Alonso: P2.

Advertisements