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Posts Tagged ‘Capitalizing on Complexity’

Sources of Business Complexity

Wednesday, April 18th, 2012 by Troy Schrock

The 2010 IBM Global CEO Study Capitalizing on Complexity included the following quote: “Today’s complexity is only expected to rise, and more than half of CEOs doubt their ability to manage it.  Seventy-nine percent of CEOs anticipate even greater complexity ahead.”

Undoubtedly, complexity is a key issue for organizations.  Indeed, complexity is one of the primary underlying issues that prevents or stymies organizational growth.  Over the years, I have come across a number of resources that identify various sources of complexity.  Here is a conglomerated (though not exhaustive) list:

  1. Growth in customers – both the number of customers served and the geographic service area.
  2. Growth in the number of suppliers
  3. Extended geographic area of operations, facilities and personnel (think different time zones)
  4. More options for products and services
  5. Increase in personnel
  6. Technology acceleration and fragmentation – an increase in technology advances as well as the number of different technology platforms (that often don’t easily integrate data)
  7. Added regulation – greater reporting and compliance monitoring requirements
  8. Growth in management organizations (layers, departments, and information)
  9. Increased development of the global competitive environment

A common response to increasing complexity is to burden the organization with extra processes that really only serve as temporary fixes.  The larger bureaucracy increases cost.  Business leaders must be disciplined in their approach to these new challenges so as not to compound the complexity from without by increasing the complexity within.


Capitalizing on Complexity

Wednesday, March 7th, 2012 by Troy Schrock

In my last post, I referred to the IBM study entitled Capitalizing on Complexity.  Here is another quote from that report: “…one set of organizations — we call them ‘Standouts’ — has turned increased complexity into financial advantage over the past five years.”

Complexity can certainly present trouble, but it also presents opportunity.  I see four ways in which your organization can capitalize on complexity:

  1. Prioritize.  Focus your organization and its resources on the best few areas.  Many of your competitors will waste precious resources trying to deal with too much.
  2. “Procedurize.”  Simplify processes by creating repeatable steps and/or integrating activities across the organization.
  3. Reorganize.  The organizational structure that worked in a different time and environment may not be the best fit for the current reality.
  4. Monetize.  Once you solve a complexity issue, share that solution with other businesses for a service fee.

Each of these is a form of innovation that either strips complexity out of the organization or creates new, more effective ways of managing complexity.  At a minimum, they will bring about cost savings, but in some cases, they will even generate additional revenue.

In short, don’t shy away from complexity!  It’s only going to increase, so you might as well use it to your advantage.  Some organizations simply charge their customers for increased complexity, but that’s the easy way out.  With a little fortitude and creative energy, you can capitalize on complexity to benefit both you and your customers.