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Bigger is no Longer Better: Complexity and the New Frontier

May 20, 2012 • Business Process, Finance & Economics, Global Business, OPERATION, STRATEGY & MANAGEMENT

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By Andrei Perumal, Kelly Jones & Ann Bryan

The world has changed – and complexity has emerged as one of the defining issues of our time.

 

For the past two decades, the pursuit of growth has created massive complexity in processes, product and service portfolios, and organizations, adding costs that companies can ill afford.

Good complexity adds value. Bad complexity destroys value. While this may sound simple, it is difficult to spot the bad complexity in practice because the cost of complexity is often “hidden” from view; since it is difficult to spot, we find that companies almost always have too much, which means they carry a lot of bad, value-destroying complexity. As complexity has continued to grow, its impact has swelled to the point that it is now the number one determinant of cost-competitiveness for the majority of companies and industries. But complexity isn’t just a cost issue; it impacts the performance of a company’s processes, and more broadly, the effectiveness of the organization itself. Overall, complexity is now the dominant driver of “health” for the majority of organizations – and addressing the complexity issue is now the new frontier.

Good complexity adds value. Bad complexity destroys value. While this may sound simple, it is difficult to spot the bad complexity in practice because the cost of complexity is ofter ‘hidden’ from view.

But how did things get this way? In short, the old approaches for managing cost and performance in organizations are no longer sufficient. Companies now need new approaches and perspectives for managing in the world of complexity.



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