Mark McDonald

The answer to the question: Is business is more complex, seems obvious.  The real question is not is business complex but where does your business put that complexity to its advantage and performance?

“Complexity?  Where do I put it?  I can tell you where I would like to put it!”

For many enterprises the question is just strange, as they do not think about complexity, its impact on customers or costs.

They treat the business symptoms of complexity with ad hoc solutions that create benefit but accrue complexity.

Consider the source of the complexity and the range of options you have to address it.  In many cases you can raise customer service and reduce cost by handling complexity in different ways including:

• Customers and Associates – they are assumed to be a source of complexity, but actually people are the most flexible resource. We do this when we fundamentally do not trust customers or our people.  They are best able to manage situational complexity where work is not structured or has routine patterns.  Use human adaptability to simplify business processes, products and systems.  This has been part of the success of Nordstrom and Amazon.

• Produces, services and channels – accrue complexity like a runaway credit card accrues interest.  Viewing products in isolation creates almost overlapping features, functions and marketing programs.  Executives accept complexity all in the name of revenue believing they can maintain margins by squeezing operations.

Product simplification not only reduces complexity but also raises the quality of revenue, customer service and cost structures.  British Airways and Tokio Fire & Marine each simplified this aspect of their business with significant results.

• Business Processes and Products – create complexity when they become a means of management control rather than creating customer value.  The result is elaborate processes, multiple exceptions and complex decisions.  These are hallmarks of complex business processes.  Business process complexity can be reduced through re-engineering and transitioning processes into reusable services.

• Business process complexity is a symptom of complexity in other aspects of the business.  We learned in the 90’s that a bad process, re-engineered at best shifts the problem to another process – moving rather than resolving complexity.  In these cases, go to the root cause process complexity.

• Measurement and Incentives – manifest complexity, as people want to be measured for the work that they do, not what everyone else does.  This creates conflicting or competing measurements.  Cut through them by establishing enterprise wide metrics with different performance targets for associates.  This will get you back to the basics and eliminate overlapping activities and management overhead.

In general, put complexity where it makes the most sense, not where you feel a short-term pain.

• Look first at the root case – often associated either with product/channel complexity or poor workforce skills.  Address these points with product simplification or simply giving your people the skills they need.

• Resolve complexity with simplification and scale by eliminating redundant practices, old business rules and duplicate IT systems.  Taking these actions concentrates business activity into the right operations raising service levels and skills.

• Change IT system last, unfortunately this is the first for many executives, as writing a check and setting complexity in silicon is the easiest thing to do.  Instead of creating new applications and specialized workflows executives should look to break business activities/decisions into fewer large grain business services.

Complexity is taken as a given in modern business.  Multiple products, customer segments, operations – that must be complex.  This is a reality for executives who address issues in isolation.  Take a step back and ask – what is causing the complexity?  And if we have complexity where should we put it?   Your customer service and cost structure depend on the answer to both questions.

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Category: 2010 CIO Strategy     Tags: Business, Business Process, IT Leadership

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