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March 21, 2012

How smarter organizations simplify...or don't

Posted by Sudhir Chaturvedi (View Profile | View All Posts) at 10:52 AM


To say that an organization can get smarter by keeping things simple is to oversimplify the argument.

Simplicity, the way I see it, is the end result achieved by organizations that smartly manage their complexity. Note that I say 'manage' and not 'eliminate'. The fact that it is impossible, in reality, to cut out complexity altogether has nothing to do with my choice of words. Rather, my point is that smarter organizations know where to draw the line. Because, every organization has both good and bad complexity, the former leading to desirable outcomes and the latter managing to achieve the exact opposite. Needless to say, smart organizations work at enhancing good complexity while suppressing the unproductive ones.

Good complexity, an oxymoron? Actually, it is a differentiator for those organizations that know what to do with it. Take the industrial goods industry, for example, where you can clearly see the different ways in which manufacturers combine advice, products and after-sales service. Those following a relatively simple approach see advice as part of the pre-sales ritual. The product must, then, be sold, and after-sales service is about making spares and technicians accessible. On the other hand, there are enterprises that leverage the advisory process to truly understand customer pain points. These insights are then meticulously channeled to build, customize and offer suitable products - manufactured in house, acquired, white-labeled...whatever. This is backed with a proactive spares and service plan delivered through the customer's channel-of-choice. Decidedly there is more complexity in the second approach, but it's complexity with a purpose - better delivery, experience, satisfaction and customer stickiness - that's near-impossible to achieve with the simpler model.

The other interesting thing is that contrary to popular perception, an organization's complexity is rarely about its structure. Complexity stems from unnecessarily convoluted processes or other inefficiencies - tucked away as easily in simple structures as in greatly layered ones. So, what's the fix? What needs to stay (good complexity) and what must go is best determined by an organization's objectives and overall strategy. One of the best examples I can think of is that of a train manufacturer we work with. Rather than manufacture in its 'least-complex' well-oiled home-facility, this organization has taken a novel approach of building its trains at the customer's location, even setting up an entire township, in an emerging market, to facilitate the process. Clearly, the goal of this organization is not just to build a good train in the most efficient, simplest way possible, but also to build equity driven by a strong CSR agenda and, most importantly, to change the rules of the game whilst competing with others who operate using more traditional models.

So, the most efficient, cost-effective or simplest organization isn't necessarily the smartest. Complexity must be seen through a different lens to appreciate its nuances. If it serves the enterprise's core agenda or helps counter an organization's 'grand challenge' then it's a smart thing to have. Complexity assessment must take into account the organization's objectives while examining the intricacies of its projects and tasks. Complexity that must be amplified is typically marked by its contribution to new revenues, customer delight and such like. That which must be eliminated, you'll find, is evident across enterprises where there are leaks in effort, time and money for no measurable strategic objective.

In every industry, companies that are remarkably similar on the outside, tend to do things differently on the inside. Ask them about it, and they can't always tell you why it is so. When an organization can clearly and convincingly articulate the reason for a more complex approach, while tying it inextricably to an organizational goal, they are onto something. These smart enterprises make complexity work for them. Simple.

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