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Complexity Kills Profits – CEOs need to simplify their businesses

November 24, 2011 • Corporate Governance, Finance & Economics, Global Business, LEADERSHIP

By Simon Collinson and Melvin Jay

The competitive environment is becoming more complex and unpredictable, and senior managers have no control over the underlying trends, from globalisation to technological change. The most damaging kinds of complexity, however, come from within.

 

There is no question that Nokia missed the boat when consumer markets shifted to the smartphone. This was not just the result of an unlucky strategic choice; there were signs that the firm had lost its way well before taking this wrong turn. It had embarked on a series of acquisitions and was building an increasingly diverse product portfolio through investments into software, content and services which were all adding complexity, but not value. More recently, new leadership and organisational restructuring have compounded, rather than solved the problem. Nokia has become even more complex and even less profitable.

Although Nokia is a current ‘fallen star’ favourite for the business media its experience with overwhelming complexity is common to firms across all industry sectors. We know that the competitive environment is becoming more complex, turbulent and unpredictable and senior managers have no control over the underlying trends, from globalisation to technological change. The most damaging kinds of complexity, however, come from within. This is where CEOs can act and need to be doing more.



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