A 2010 global survey of more than 1,500 CEOs conducted by IBM revealed that 60 percent of top executives face an increased amount of complexity in their business. Seventy-nine percent of them expect an even greater level of complexity over the next five years and only 49 percent of them estimate that they will be ready for it.
The questions then become: Are you ready to face more complexity? How good are you at managing complexity? Can you leverage this complexity to create differentiation and competitive advantage?
Complexity can be good and bad at the same time. There are four types of complexity in business and it is important to break them down to be able to understand them and eventually address them:
Imposed complexity is coming from regulations and mandatory compliance guidelines both at industry and governmental levels. It is typically not controllable and manageable so it is best to prepare for it and find a way to minimize its impact on the business.
Inherent complexity is structural complexity, which is inherited and well rooted in the business. It can be addressed by making deep structural changes that might be painful but beneficial to the future of the business.
Designed complexity is based on purposefully designed strategies and programs to support the long-term vision for the firm. This complexity is based on managerial choices aimed at creating competitive advantage.
Unnecessary complexity is the result of legacy management design and structure that might not have been updated, eliminated or refreshed. It is unnecessary because it brings no value to the business and it solely exists because no one is paying attention to it.
As a leader of your organization and in the face of resource constraints, I highly recommend you start paying attention to these four types of complexity. Assemble a process and team to review complexity and engage in the design of strategies that will leverage complexity to bring differentiation to the market. Here are some quick tips on how to do this:
Design positive complexity to create differentiation.
This should be the main focus of your critical actions and priorities. Can you create complexity that differentiates your supply chain processes, your customer service experience levels and your digital marketing strategies without overwhelming your customers? Can you create unique value selling propositions based on unique internal designs and systems?
Quickly kill unnecessary complexity while reassigning resources and skills.
Unnecessary complexity might be inherited from legacy management designs or decisions. They might bring zero business value and need eradication. Be decisive and free up resources for something else.
Transform internal complexity into simple value propositions.
Remember that internal complexity has to be transformed into simple offerings for customers. If you propose something to your customers, do it by absorbing complexity and acting as a consultant for your customers.
Focus on pockets of value-creating complexity for customers.
It is all about value. Complex designs have to bring value to customers. If not, they should not be implemented. As a leader, make sure value is real and can be monetized through pricing. You might have the best supply chain management process, but will customers see the value in it and be willing to pay for some of the services?
Assign your best talent to manage complex problems and initiatives. Complex problems need mindful problem-solving.
The business world is changing in front of our eyes. What are you doing to change with it while remaining nimble, easy to do business with and focused on value? Are you leveraging complexity to create sustainable competitive advantage?
Stephan Liozu is the founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management. He earned a doctorate in management at Case Western Reserve University and can be reached at [email protected] For more information, visit www.stephanliozu.com.