Friday 23 August 2013

The Principle of Fragility



The following equation, which we call the Principle of Fragility, has been coined by Ontonix in early 2005 and indicates why complexity management is a form of risk management:


Complexity X Uncertainty = Fragility        


In order to understand the Principle of Fragility let us borrow Fourier’s idea of variable separation and create a useful parallel. Let us assume, without loss of generality, that the term “Complexity” is specific to a certain system, e.g. a corporation, while  the term “Uncertainty” concentrates the degree of turbulence (entropy) in the environment in which the system operates, e.g. a market. The equation assumes the following form:

Csystem  X Uenvironment = Fragility         

or, in the case of a business,

Cbusiness model X Umarket = Fragility         

What the equation states is that in a market of given turbulence a more complex business model will be more fragile (exposed). In practical terms, the equation may be seen as a mathematical version of Ockham’s razor: with all things being equal a less complex compromise is preferable.




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