All of us technology professionals were supposed to make business simpler. Well, we failed. As I am working with companies with hundreds if not thousands of enterprise applications and multiple competing business models and processes in the same company it makes you wonder where this is all going.
The new buzzword in business improvement is complexity management. Most companies still do not understand the correlation between increased complexity (products, technologies, organizations) and the resulting growth or lack thereof.
Harvard Business Review had a great article on this topic titled Innovation vs Complexity:
As a company increases the pace of innovation, its profitability often begins to stagnate or even erode. The reason can be summed up in one word: complexity. The continual launch of new products and line extensions adds complexity throughout a company’s operations, and, as the costs of managing that complexity multiply, margins shrink.
They also point out that business wealth is created in the simplification of interactions between systems, processes and organizations.
That is where most studies are going. Internal complexity becomes the number one prohibitor of growth. It is not lack of customers, lack of talent, lack of products. in fact it is due to too many products, services, channels and talent. All major strategy shops are exploring this topic in recent articles from ATKearney, Bain, and Booz-Allen and McKinsey.
Complexity comes in many forms from product portfolio proliferation through diverging technologies to non-standard processes.
If you can afford the top strategy firms they could send you back to the drawing board and ask you to design your business from scratch as if your were selling one product to one customer. Then keep adding product lines and channels without adding unnecessary organizations or processes. It is amazing how an exercise like that paints a real best-in-class view of your business.
In my research complexity and uncertainty feed on each other. When businesses face uncertainty (and who doesn’t) they tend to create what I call safety buffers by adding people, procedures and technologies. Depending on the business it may be
- excess inventory or capacity because the management does not trust the planning process or technology
- excess people because the human glue is needed to ensure information flow in divergent processes
- excess process and technology solutions because divergent organizations need more procedures and technology
- excess innovation to meet unspecified customer needs
Complexity management may one day give us some guidelines on how to simplify and standardize businesses and show us companies that did go back to the proverbial drawing board. Until then new technologies will need to focus on simplicity, standardization and thereby making a small contribution to that elusive concept: sustainable growth.
As the Booz-Allen study so aptly stated when describing the role of technology providers:
Process complexity is one of the silent killers of profitability. Any time a new product is added or changed or a service level is increased without addressing complexity the result is a process that is a little more cumbersome and a little more costly. Over the long haul, many good strategies go wrong simply because of the drag created by all those incrementally increasing costs.
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