Decision makers tend to overlook or ignore weak signals and small initiating events – embedded in social systems, involving organizational hierarchies, cognitive biases and group dynamics – that can suddenly trigger and smolder small-scale as well as large-scale crises (this also applies to successes).

The merger between Union Pacific and Southern Pacific Railroad (UP/SP) was approved, despite the objections of several entities. Even before the merger, the risk of operational problems was apparent due to SP's history of dysfunctional behavior and operational failures. Several problems arose after the merger, including congestion, delays and operational disruptions. Despite warning signs and seemingly random events indicating trouble, UP's management ignored the problems, ultimately leading to a major crisis characterized by total gridlock. Management blamed external factors, ignored warning signs and maintained an inflated view of the company's capabilities.

Weick and Sutcliffe suggested treating any lapse as a symptom of potentially serious consequences. Organizations should not become hypochondriacs by paying excessive attention to small signals, leading to a constant state of fear. The distinction between unimportant stimuli and small initiating events must be based on an understanding of how events scale:

- The relationship between volume and surface area: At UP, doubling the number of customers and track length without a proportional increase in efficiency led to an imbalance in the railway system;

- When elements in a complex system interact, power laws arise: At UP, the normal distributions of several variables became skewed after the merger, leading to scalability and the eventual gridlock of the entire system;

- Individuals save energy by using familiar words, creating efficiency. In the case of the UP-SP merger, the languages of the two organizations remained frozen, indicating a lack of self-organization;

- While some individuals would become more important for network connectivity during the UP-SP merger, old dominant nodes resisted change, hindering the emergence of new influential figures;

- Systems continually reshape themselves to adapt. At UP, this self-organized criticism was absent. The top-down management style and resistance to self-organization prevented the emergence of a critical dynamic necessary for rapid adaptation.

Of course, this is an after-the-fact analysis. Conflict is normal when people work together. The task of managers is precisely to resolve tensions when existing structures do not lead to a sensible solution (thanks to Stefan Kühl for this quote).
 
Source:
McKelvey, B., Andriani, P. (2010), Avoiding extreme risk before it occurs: A complexity science approach to incubation, in: Risk Management Vol. 12, No. 1, Pages 54–82.