Uncategorised – Complexity Center

Schools of Though on EA:

The Enterprise IT Architecting (EITA) school views enterprise architecture as “the glue between business and IT”. Focusing on enterprise IT assets, it aims at business-IT alignment, operational efficiency and IT cost reduction. It is based on the tenet that IT planning is a rational, deterministic and economic process. EA is perceived as the practice for planning and designing the architecture.

The Enterprise Integrating (EI) school views enterprise architecture as the link between strategy and execution. EA addresses all facets of the enterprise in order to coherently execute the strategy. The environment is seen both as a generator of forces that the enterprise is subject to and as something that can be managed. EA is utilized to enhance understanding and collaboration throughout the business.

The Enterprise Ecological Adaptation (EEA) school views EA as the means for organizational innovation and sustainability. The enterprise and its environment are seen as coevolving: the enterprise and its relationship to the environment can be systemically designed so that the organization is “conducive to ecological learning, environmental influencing and coherent strategy execution.” EA fosters sense making and facilitates transformation in the organization.

Level or Enterprise Architecture

Technical Architecture (AT) has an operational focus on reliability and present day asset utilization and is geared to present-day value realization. This is the realm of traditional IT architecture, information systems design and development, enterprise integration and solution architecture work. AT also addresses architectural work practices and quality standards, e.g. architectural support of implementation projects, development guidelines, and change management practices. In terms of organizational structure, AT would pertain to the technical level of organization, where the products are produced or services are provided.

Socio-Technical Architecture (AS) plays an important role as the link between strategy and execution. The business strategy is translated to a coherent design of work and the organization so that enterprise strategy may be executed utilizing all its facets, including IT. AS is about creating enterprise flexibility and capability to change rather than operational optimization: the focus on reliability is balanced with focus on validity in anticipation of changes, whose exact nature cannot be accurately predicted. AS would pertain to the managerial level of organization, where the business strategy is translated to the design of the organization.

Ecosystemic Architecture (AE) is an embedded capability that not only addresses the initial design and building of a robust system but also the successive designs and continual renewal of a resilient system. The architecture must allow for co-evolution with its business ecosystem, industry, markets, and the larger society. AE would pertain to the institutional level of organization, where the organization relates to its business ecosystem, industry, markets, and the larger society.

Arthur WB (2021) wrote a paper comparing conventional vs complexity economics.

Conventional neoclassical economics assumes:

Perfect rationality. It assumes agents each solve a well-defined problem using perfectly rational logic to optimize their behaviour.
Representative agents. It assumes, typically, that agents are the same as each other — they are ‘representative’ — and fall into one or a small number (or distribution) of representative types.
Common knowledge. It assumes all agents have exact knowledge of these agent types, that other agents are perfectly rational and that they too share this common knowledge.
Equilibrium. It assumes that the aggregate outcome is consistent with agent behaviour — it gives no incentive for agents to change their actions.

But over the past 120 years, economists such as Thorstein Veblen, Joseph Schumpeter, Friedrich Hayek, Joan Robinson, etc have objected to the equilibrium framework, each for their own reasons. All have thought a different economics was needed.

It was with this background in 1987 that the Santa Fe Institute convened a conference to bring together ten economic theorists and ten physical theorists to explore the economy as an evolving complex system.

Complexity economics sees the economy as not necessarily in equilibrium, its decision makers (or agents) as not superrational, the problems they face as not necessarily well-defined and the economy not as a perfectly humming machine but as an ever-changing ecology of beliefs, organizing principles and behaviours.

Complexity economics assumes that agents differ, that they have imperfect information about other agents and must, therefore, try to make sense of the situation they face. Agents explore, react and constantly change their actions and strategies in response to the outcome they mutually create. The resulting outcome may not be in equilibrium and may display patterns and emergent phenomena not visible to equilibrium analysis. The economy becomes something not given and existing but constantly forming from a developing set of actions, strategies and beliefs — something not mechanistic, static, timeless and perfect but organic, always creating itself, alive and full of messy vitality.

Difference between Neoclassical and Complexity Economics

In a complex system, the actions taken by a player are channelled via a network of connections. Within the economy, networks arise in many ways, such as trading, information transmission, social influence or lending and borrowing. Several aspects of networks are interesting: how their structure of interaction or topology makes a difference; how markets self-organize within them; how risk is transmitted; how events propagate; how they influence power structures.

The topology of a network matters as to whether connectedness enhances its stability or not. Its density of connections matters, too. When a transmissible event happens somewhere in a sparsely connected network, the change will fairly soon die out for lack of onward transmission; if it happens in a densely connected network, the event will spread and continue to spread for long periods. So, if a network were to slowly increase in its degree of connection, the system will go from few, if any, consequences to many, even to consequences that do not die out. It will undergo a phase change. This property is a familiar hallmark of complexity.

Reference:

Arthur, W.B. (2021). Foundations of complexity economics. Nat Rev Phys 3, 136–145 (2021). DOI: 10.1038/s42254-020-00273-3

Category: Uncategorised

Enterprise Architecture for Digital Transformation

Schools of Though on EA:

Level or Enterprise Architecture

Adaptation and Maladaptation

Complexity Economics