Complexity Theory and Organizations –The Magnum Ice Cream

You can very successfully use  network theory to analyse complexity in business. It can be fun, and easy to visualize. I personally understood why businesses can become more complex, yet more successful, analysing the evolution the network of the most successful European brands of the past 25 years –the Magnum Ice Cream. Networks theory today is extremely advanced, and lots of tools are available (see my pictures of the “Magnum Network”).

The Complexity of the Magnum Ice Cream

Italians love gelato.  On hot summer afternoons, cities fill up with families strolling  around, each member with a gelato in hand. I have always been part of  this collective passion: when I was a teenager, my friends and I  preferred to meet outside gelaterias and indulge in huge ice cream  cones, rather than get drunk in bars.

In  a country where the gelato is sold soon after preparation, and where  teenagers prefer it to alcoholic beverages, you may wonder how packaged  ice creams can possibly sell at all. But they do, and account for 30 percent of the Italian ice cream market thanks to heavy marketing and widespread distribution. Of the 30 percent, half is in the hands of Anglo-Dutch multinational Unilever, under the brand Algida.

For decades, Algida’s strongest seller was the Cornetto,  an imitation of the artisanal ice cream cone, which was launched in  1959, the same year Fellini produced La Dolce Vita. Thirty years later,  the country was miles away from the economic boom described by Fellini,  but the Cornetto hung around and was joined by a considerable number of  competitors.

The  1980s  were a time of consumerist excess, with brands offering cherry,  amaretto, chocolate and biscuit all in the same ice cream. It was in  this environment that Unilever, in 1989, launched Magnum, the simplest ice cream bar ever –vanilla with a chocolate coating.

As an apocryphal quotation of Albert Einstein goes, “things should be as simple as possible, but not simpler”.  The Magnum was simple, but not straightforward. Most ice creams had  vanilla filling, but only few of them had good quality vanilla, and not  one that was covered by thick, good, real chocolate.  To produce good  quality coating, Unilever asked Belgian Callebaut to develop a chocolate  that could go down to -40 degrees without breaking, something did not  exist before.

The  Magnum stood out from the crowd because it was simple, yet  sophisticated. According to Unilever, it was already in 1992 “Europe’s  most popular chocolate ice cream bar”.

Simplicity,  though, did not last for long with the Magnum. With time, the Magnum  evolved from the original ice cream to an ecosystem of elaborated ice  creams: Almond, Mint, Caramel and Nuts, Yogurt; bigger and smaller  Magnums; even Magnums without sticks. The original Magnum, in this new  fauna of Magnum Ice Creams, was renamed Magnum Classic.

Magnum’s Syndrome?

When  this process of differentiation started, and the promise of simplicity  was broken, I got upset. When Unilever came out with Moments, small ice  creams stuffed with caramel and hazelnut, I decided the company had  reached the limit, and prophesied Magnum’s fall from greatness to dust.

In  conversations, whenever dealing with something unnecessarily complex, I  would refer to what I called the Magnum Syndrome: “Things start nice  and simple, but with time they accumulate complexity. This is when they  lose their strength, like in the Magnum’s case: it is not the delicacy it used to be,there’s too much noise around.”

I could find plenty that had fallen victim to the Magnum Syndrome. World’s economy, science, politics, societies in general,  Europe in particular. When Cherry Guevara was launched, together with  other terrible Magnum flavours like the John Lemon, the Wood Choc, and  the Jami Hendrix, I considered them the four Horsemen of the Apocalypse.  The Magnum ecosystem will collapse soon, I was thinking while biting  into my Classic. And global capitalism will surely follow.

Taming Complexity

I might have thought that science had become too complex, but I was still convinced that physics is an extremely successful tool with which to tame complexity.

Examples of physics successfully taming complexity abound. Take statistical mechanics. During 19th century, physicists studied the statistical properties of  the motion of molecules in a gas and discovered that despite their  seeming randomness, properties like temperature, pressure, and even the  obscure concept of entropy were all explainable in terms of probability:  the behaviour of billions of molecules could be described by just a few  variables linked to each other.

Key to the success was creating ideal systems, like perfect gas or  But how can one possibly find an ideal system with which to  describe the behaviour of the stock market, human societies or the  marketing strategy of Unilever?

The Network Revolution

With perfect timing, a new branch of physics was officially born together with the fauna of Magnum ice creams: network theory.

Network theory was the illegitimate child of the World Wide Web.  With the Web, it finally became possible to obtain data with which to  study how networks evolve. Physicists and mathematicians threw  themselves into data analysis and modelling, and with new results on  social topics too: networks of people exchanging email messages, web  sites referring to each other, blog feeds, all produced an abundance of  digital data. Results were so original that stern journals like the Physical Review begun to publish articles on social networks –a social topic, for the first time ever.

With network theory, physicists were entering the arena,  and facing the complexity of the “real world” – just like biologist,  economists, sociologists, and anthropologists had been doing for a  while.

The power of networks is that everything can be reduced to a network and studied, even the Magnum ecosystem.  As soon as we can connect two ice creams because they have in common a  particular ingredient, like caramel or dark chocolate, or are part of  the same offer, like the “Seven Deadly Sins”, we have a network.

For  instance, the first Magnum Classic leads to the first four Magnum  variations (Double Caramel, Dark, Double Chocolate, and Almond) that  followed it a few years later while the Double Caramel leads to Taste  (in the Five Senses) and Sloth (in the Seven Sins), which are similar  ice creams that were subsequently launched.

In  this way, we can draw a graphical representation of the increase in  complexity of the Magnum system over time. From the simple “star” at the  beginning of the 1990s, with one central ice cream and four peripheral  ones…

(the size of circles is proportional to the influence)
to the intricate network arrived at post 2000:

If  we traced the evolution of the Web over the same period, we would get  similar figures. We would see complexity emerge from the first 50+  webpages published by Berners-Lee in 19901 to the billion pages in 2000.

The Magnum Strategy: Complexity is Good

In  complex, organised, networks, “the whole is more than the sum of its  parts”, writes Herbert Simon in “The Architecture of Complexity” (1956).  This “more”, this emergent property of the system –the network–, is  what makes different elements get together in a network and cooperate.

Simon was right. I, on the other hand, had been completely missing the big picture when criticising complexity.

What if we thought of the Magnum Ice Creams as an organism?  Being sold under the same brand, Magnums form a collaborating  community: each Magnum tell us something about the other Magnums  –something good – with all Magnums starting with the most excellent of  reputations, based on the original Classic’s. A customer will expect,  and find, good quality ingredients in any Magnum because she knows that  the original Magnum’s strength was good quality vanilla, and thick  Belgian chocolate. In this sense the Classic has a link with all other  Magnums collaborating with them in a virtuous circle: the Classic’s reputation gets stronger as it recommends other high  quality ice creams, which in turn, being actually decent, recommend the  original Classic. This potential circle can exist for Magnums other than  the classic. Now under the area of influence of the Caramel are the  “Caramel and Nuts” and “Sloth” Magnums, which Unilever introduced after  its success.

With its fast growing reputation, Unilever would continue to introduce new Magnums at a fast pace, making the Magnum empire more complex, but also more powerful.  Thanks to this strategy –complexity with high quality and strong  connections– the Magnum became in 2000 the largest single ice cream  brand in Europe.

This  success was not possible if all twenty-plus Magnums were sold by  different companies, with different brands. We would see a situation  similar to the one before the Magnum arrived: many over-complicated ice  creams, where it is difficult to make a choice. The  stronger the connection between the elements of a system, the bigger  the possible success. No connections between the elements, no success.

Simon shows that Magnum’s evolution towards complexity was not just a potential syndrome, but a powerful strategy –the Magnum Strategy:

Start simple. Learn from the environment. Grow complex maximising internal collaboration


Author:

Mario Alemi, Partner, elegans.io


 

A few references:

  • Maljers, F (1992) “Inside Unilever: The Evolving Transnational Company”, Harvard Business Review, September 1992
  • Berners-Lee, T., Fischetti, M., & Foreword By-Dertouzos, M. L. (2000). Weaving the Web: The original design and ultimate destiny of the World Wide Web by its inventor. HarperInformation.
  • Dorogovtsev, S, Mendes, J (2003) “Evolution of Networks”
  • Clarke, C. (2012). “The science of ice cream”. Royal Society of Chemistry.

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