A Perspective on Complexity Reduction

Almost every executive today, be it a CEO of a global multinational firm, a CEO of a startup, or a business leader speaks about the complex environment they operate in today making their jobs more stressful than 10 years ago. This so-called complexity is only going on rising with globalization, multiple regulations, disruptive business models, new competitors, changing customer preferences, and a plethora of technologies, etc.

The larger issue at play is executives not understanding complexity well enough to dimension it or resolve it. We need to understand a few specific questions regarding complexity reduction:

• How does this complexity come into being?
• What causes it?
• How to dimension it or measure it?
• What levers could one pull to contain or eliminate it?
• How do we reduce enterprise complexity?

Foremost, complexity has a different size, shape, and form depending on where in the organization you view it from. For executives, complexity arises from the size of an organization, the diversity of the products, the several distribution channels, multi-country operations, cross-border legal and tax issues, diversity of skills and competencies, etc.

For middle managers who often operate within a country, business or department worry less about executive definitions of complexity. The complexity revolves around the ability to get their jobs done, the levels of authority, accountability, the clarity of their own role, systems, and the business processes that enable their own productivity, etc.

These different definitions of enterprise complexity versus individual complexity being looked at from different vantage points make one group oblivious to the other’s issues. There are more people affected by the complexity at individual levels which cascade up and amplify existing enterprise complexity.

Another fundamental issue is that some of the problems with complexity have been looked at in silos not organizationally. For example, executing an organization design project to minimize roles overlaps, clear reporting relationships, and trying to resolve these issues often neglect nuances with functions e.g., IT, access control, and transfer complexity from one area to another without eliminating it from the organization. Complexity in an organization will not go away unless it is attacked holistically at an enterprise level.

Measuring complexity needs to occur at the business process level at a minimum and not at a functional level. Metrics and benchmarks regarding complexity can be captured by looking at the variability of processes, average decision-making time, productivity, the throughput of a business process, response, and resolution times to support or a number of systems, etc.

Not all complexity is bad hence differentiating between good complexity versus bad complexity is important. Good complexity adds a competitive advantage due to its sophistication or makes it hard for the competition to replicate. Good complexity is always controlled whereas bad complexity is uncontrolled and drives ambiguity, reduces accountability, creates confusion, and takes a toll on productivity, and increases costs, it often grows at an alarming due to lack of proper controls or governance.

Let us understand this with an example, the planes of the 1950s and 60s which were accident-prone and crashed much more frequently on technical failures but today’s planes although are a lot more complex and sophisticated but safer and more reliable, hence not all complexity is bad.

An organization likely has a mix of both good and bad complexity; therefore, understand the complexity profile of the enterprise before we mitigate it ensuring good complexity is preserved and the bad is eliminated.

In my experience, complexity in any organization can fall into are four major profiles per the figure on the left. Any organization with low levels of good and bad complexity is an unsophisticated business, while if the levels of good and bad complexity are high then the competitive advantage is negated due to the deadlock positions assumed between the two. Before embarking on a complexity reduction, understand where your organization lies on this grid and try to reduce complexity holistically, also make sure processes are put in place to stop the reappearance of bad complexity.

Concluding Thoughts

• Understand complexity from every vantage point i.e., executive, mid manager, frontline troops, etc.
• Understand good vs bad complexity!
• Don't fall into the complexity doom loop i.e., put in place processes that keep bad complexity out!
• Reducing the variability of everything is a start to reducing complexity.
• Leveraging technologies such as machine learning, blockchain, etc. can help you navigate complexity more efficiently – once you have complexity, it needs to be measured, monitored, and mitigated.