Mastering Complexity Through Simplification: Four Steps to Creating Competitive Advantage

Mastering Complexity Through Simplification: Four Steps to Creating Competitive Advantage

          
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Mastering Complexity Through Simplification: Four Steps to Creating Competitive Advantage

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    Businesses compete in a world that is growing ever more complex. Disruptive technologies emerge with increasing frequency. Customers’ needs and demands change at breakneck speed. New competitors are always entering the fray.

    In their attempts to reduce uncertainty and reestablish control amid this new complexity, companies tend to introduce new reports, new rules, and new processes. Such reactions, however, simply translate external complexity into internal “complicatedness”—the counterproductive proliferation of cumbersome structures, processes, and systems. Complicatedness hinders productivity by creating a work environment that leaves employees disengaged and unmotivated. To be successful in today’s complex and fast-changing world, companies must be highly agile and flexible—able to identify opportunities and make informed decisions quickly in order to exploit those opportunities. Those companies that are able to hone that agility in the face of increasing external complexity will emerge with a clear competitive advantage.

    Few companies, however, possess these capabilities. In our discussions with business leaders, we frequently hear about companies that wrestle with a host of internal challenges, including slow decision-making processes, endless meetings, disengaged employees, and increasing costs. And it’s not only senior management that recognizes company shortcomings: employees deep in the organization tell us about their frustrations with meetings that are overcrowded with attendees who have no clearly relevant role, too many initiatives going on in parallel, little recognition from supervisors for results achieved, lack of clarity regarding decision rights, and an inability to get things done quickly.  

    But while management and other employees are obviously well aware of their company’s flaws, too often they are unable to remedy them. They either refrain from trying to tackle the big problems, or they attempt to address them, only to have the effort fail or even be counterproductive. Many such disappointments stem from actions that, on the surface at least, are reasonable. Management instinctively takes aim at the problems with targeted, direct, and seemingly decisive measures, creating new structures, rules, reports, KPIs, and committees. In many cases, such measures ignore the underlying root causes and ultimately impose even more complicatedness.

    Working with numerous clients, each of which started with varying degrees of complicatedness, we have learned that all companies can effectively fight complicatedness and can successfully simplify in a smart way. The key is to understand the link between performance problems and employee behaviors and then determine which elements of the complex, intertwined organization dynamics drive these behaviors. We follow four steps—starting with the identification of the key performance problems and culminating in the design and implementation of solutions. And while this approach demands commitment and energy—as well as a new perspective on what drives company performance—the payoff far exceeds the effort and resources expended. 

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