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June 18, 2012

Simplify or have an egg on your face

Posted by Manish Srivastava (View Profile | View All Posts) at 6:06 AM

Simplification is a persistent theme in the minds of executives leading large global organizations. As organizations grow in size, they also tend to become complex. The number of products they offer increase and so does number of  customers, operating locations, suppliers, systems, employees - all increase in quantity and variety. The related cost of management of each increases. Decision making becomes slow and bureaucratic. Getting the same thing done takes more effort. People connected with the organization experience stress and low morale. Productivity is impacted negatively. Growth slows down and in a few scenarios, catastrophic failure occurs. In today's globally connected and dynamic marketplace, simplification is no longer just a means for managing costs but is paramount for survival.

To understand why simplification is important, we need to understand the how complexity builds and affects us. Let's start with a simple system, say a perfect spherical ball which is rolling with a velocity v on a planar surface. So the distance d travelled by the ball in time t can be computed by d = v * t. We call this a simple system, because most of us can compute and predict the position of the ball with very little mental effort. Complexity of the above system can be increased by replacing the ball with an egg or making the surface non-planar. This increases the number of variables based on which the distance d can be calculated. Now most of us will need at least a paper and pencil to calculate the distance d.  On further adding variables, we can increase the complexity of the system to a point where we will all need a calculator or a computer to solve the problem and also help of an expert. As the system becomes complex, we are unable to comprehend and predict its behavior.

Real world systems are far more complex than one described above. We deal real world complexity every day - while crossing the road, making financial decisions, organizing our children's toys or while making holiday plans. We are dealing with the complexity around us by simulating and computing. It allows us to predict the future state of the system and take actions that will enable us to meet our goals - what speed is the car coming and should I stop or cross the road. Let's make this a little real - say somebody throws an egg at you. Your brain needs to simulate and computes where the egg will be in the future, make a decision whether your best option is to catch it or duck then instruct your hand or body to physically move to the calculated position to increase your chances of catching the egg or ducking. If your brain is unable to comprehend the direction, speed etc. of the egg and compute fast enough such that your hands or body have enough time to move, you are likely to panic (get stressed), miss catching the egg (miss your goal of avoiding being hit) and chances that you will have egg on your face increases ( i.e. risk of catastrophe rises). While luckily, egg is not being thrown at us all the time, we are all simulating the future all the time in the real world. However, our ability to simulate the future is limited. If we are put in an environment where we are unable to simulate the future, then we feel stressed, out of control and often make errors in judgment that may lead to catastrophe. 

The same is true for large organizations. As they grow in size, complex interdependencies develop between systems and processes. Feedback loops set it which causes variables to behave unpredictably - making it difficult to compute and predict.  Small changes in one part have cascading effect on large parts of the organization. Organizations become fearful of change as they are unable to predict the outcome of the change. The very systems and processes that were put in place to leverage the economies of scale make the organization difficult to change. Diseconomies of scale set in. Getting the same thing done requires more effort. Stress increases. Productivity falls. Growth stalls. As the world is becoming increasingly interconnected - through financial networks, global supply chains, telecommunication networks and social networks - events in one part rapidly spreads worldwide. In such a networked environment, a lot of "eggs" are being thrown around. Organizations that are unable to simulate and comprehend fast enough to catch or duck, are likely to have "egg" on their faces.


Very true Manish. However the typical thing we hear is with growth comes systems and processes as you cannot do things on face value and hence complexity increases. The point really is how does one address it? how do organizations simplify

Liked the egg analogy. Processes are like friction - necesaary evils.In complex organizations we need to figure out - 1)What is the force required to overcome the static friction. 2)Once,the motion starts, how much force/trigger needs to be given to continue the motion,given the dynamic friction exists which has less coeffiient than static.

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