Complexity is now top of the agenda for many Chief Executives. In today’s world—that is, after the financial collapse—companies’ plans for top-line growth are being scrutinized to determine whether they will deliver profitable top-line growth. Investors are questioning cost structures that are out of line. Management teams are facing a knot of processes and organizational structures, and wondering how they will remain agile and responsive enough in the market place. At the root of these challenges is complexity, which injects cost, noise, and distance between you and your customer. We discuss the issue in depth in our book, Waging War on Complexity Costs, and suggest strategies for companies to take action. In our ongoing work with companies over the last two years we have seen nothing to suggest this issue is retreating. In fact, even more so than when we wrote the book, our perspective is that complexity—and companies’ response to it—is one of the biggest factors in determining whether companies will thrive or falter.
This may sound dramatic, but consider how “non-value-added” complexity, the type that customers do not value and would not pay for, whether it be product, process or organizational in nature, amounts to a tax—a complexity tax. Some companies, maybe most companies, will pay the tax. They will pay it because they’ve always paid it. Some companies, maybe your competitors, will refuse, and instead take on the hard work of cutting through the complexity. They will reap the benefits of greater margin, options for reinvestment, and organizational clarity. Over time these advantages are decisive. We have had the privilege of partnering with leading companies to take on this issue. Below we share a few perspectives from our experience, our Lessons from the Front:
Lesson #1: Complexity is a systemic issue. Therefore, to go after it requires different strategies and approaches than most companies use today.
It was Bertrand Russell, the English mathematician and philosopher, who commented that, “the greatest challenge to any thinker is stating the problem in a way that will allow a solution.” This is certainly the case with complexity. As a systemic issue, it is defined by a large number of interdependencies. Therefore, to remove complexity costs requires taking an integrated approach, which may combine a few “concurrent actions” in order to release benefit.