# Simplicity is the ultimate sophistication

Excessive complexity is a source of *vulnerability *and cause of loss of *profitability*. It also limits *governability*. To counter its effects it must be managed, hence it must be measured. Managing the complexity of businesses and systems helps make them less fragile and more resilient.

Ontonix is the first company to have devised scientific means of measuring complexity and resilience of generic, even huge systems. Since 2005 we deliver the real-time Complexity Management Engine, OntoNet™.

OntoNet™ can be integrated into any IT infrastructure, ERP or SW system to monitor in real-time the complexity and resilience of:

- Corporations
- Supply networks (often erroneously referred to as supply chains)
- ICT systems, networks
- Stocks, portfolios, markets
- Critical infrastructures
- Systems of systems
- The Internet of Things

We identify the concentrations of complexity in a system or process and pinpoint those really critical to its resilience, governability and performance. In essence,

# QCM - a new way to run a modern business

The added value:

- A real-time 'CAT-scan' of a business/system/process - this delivers totally new information
- Identification of hidden critical areas
- Measure (not score!) of resilience
- Early-warnings of increased exposure - this buys time
- All your KPIs synthesized into one. Objectively.
- A holistic picture of the situation

Managing complexity requires a metric. Complexity is defined as a function of the *structure of information flow* within a system and *entropy*, which measures disorder as well as information content. Formally, complexity is defined as follows:

# C = *f*(N; S; E)

where N is the number of variables used to describe a system (e.g. the number of entries in a Balance Sheet or the number of aircraft in a portion of airspace), S reflects the *structure* of inter-dependencies between these variables, and E is entropy ('disorder'). Entropy is computed based on Shannon´s formulation and expresses in bits the amount of information. Based on our formulation, complexity measures the total amount of *structured information* in a system and its unit is the *complexity bit* or simply cbit.

# Complexity is an attribute of every system

... man-made or natural. Complexity is not 'order on the edge of chaos'. It is a dimension of every physical system.

A key feature of our complexity metric is that it is bounded. The upper complexity bound, known as *critical complexity*, is of paramount importance. It measures the maximum level of complexity a given business, process or system is able to sustain. In proximity of critical complexity systems are fragile, dominated by disorder and are non-governable.

# Efficient and resilient systems function far from their critical complexity

This brings us to the fundamental question:

# How complex and resilient is Your business?

# What is its critical complexity?

In order to obtain a measure of the complexity, critical complexity and resilience of your business, write to us.

# Examples

Analysis of complexity of back-office processes of bank: identification of sources of hidden inefficiencies

Analysis of air-traffic complexity and fragility: measure of traffic complexity based on radar output, identification of critical flights

Complexity-based construction of high resilience stock portfolios: design of low-volatility portfolios that outperform markets

Write to us to obtain information about Quantitative Complexity Management.