The Power of Simplification in Today’s Business Landscape
Juliano Powidayko Alberici
Business Leadership, Commercial Management, & Innovation | Driving Value Creation for Sustainable Growth | Sustainability Transformation & Value Innovation
In the rapidly evolving landscape of business, complexity often emerges as a significant challenge that can impede an organization’s ability to thrive. As companies scale, they tend to introduce intricate processes, elaborate systems, and layered hierarchies, all in the name of efficiency, control, and risk management. While these efforts may seem necessary to manage growth, they often lead to unintended consequences, such as stifled innovation, reduced agility, and a loss of focus.
In fact, McKinsey studied around 900 companies in a survey (McKinsey 2010 -? How do I manage complexity in my organization), and they have identified that Managing complexity well can create three major benefits:
1. Higher returns. In research with 1,150 senior executives of major companies (each of which had at least 1,000 employees), we found that the companies reporting low levels of complexity (those where it was “easy to get things done”) had the highest returns on capital employed and the highest returns on invested capital.2
2. Lower costs. In our experience, four out of five organizations that reduce complexity also reduce their costs. Some have saved almost 20 percent of personnel costs by eliminating activities that create complexity but add little value.
3. Improved employee satisfaction. Reducing complexity removes barriers to getting things done. When one retailer managed to cut the time it took to develop and approve some new products by almost half, it also took care of the frustration experienced by product development and operational staff at the same time.*
To truly succeed in a competitive environment, organizations must recognize the dangers of complexity and embrace simplification as a strategic imperative.
The Pitfalls of Complexity
Complexity in business operations can take many forms—whether it’s overly detailed processes, a proliferation of management layers, or cumbersome decision-making structures. While each of these elements may individually serve a purpose, together they create a tangled web that can be difficult to navigate. This complexity limits an organization’s ability to adapt to changes in the market or respond to emerging trends. In a world where agility is key to survival, the inability to pivot quickly can be detrimental.
Throughout my professional career, I have encountered many complex organizations. In most of them, complexity was widely recognized as an issue, especially from a bottom-up perspective. Employees often felt overwhelmed by a heavy workload filled with tasks that did not necessarily contribute to the objectives they were striving to achieve, leading to frustration and inefficiency. From a top-down perspective, C-level executives and directors were typically aware of how this complexity hindered the organization’s ability to adapt and pivot when necessary, ultimately affecting company performance both internally and externally. Yet, despite this awareness at both levels, neither employees nor leadership were able to successfully implement the necessary changes, as they found themselves entangled in the very complexity they sought to address.
In a study made by BCG (Boston Consulting Group, 2017 - Mastering Complexity Through Simplification: Four Steps to Creating Competitive Advantage) they identified that In our discussions with business leaders, we frequently hear about companies that wrestle with a host of internal challenges, including slow decision-making processes, endless meetings, disengaged employees, and increasing costs. And it’s not only senior management that recognizes company shortcomings: employees deep in the organization tell us about their frustrations with meetings that are overcrowded with attendees who have no clearly relevant role, too many initiatives going on in parallel, little recognition from supervisors for results achieved, lack of clarity regarding decision rights, and an inability to get things done quickly.??
They explain further But while management and other employees are obviously well aware of their company’s flaws, too often they are unable to remedy them. They either refrain from trying to tackle the big problems, or they attempt to address them, only to have the effort fail or even be counterproductive. *
In my experience, a successful strategy to drive change begins with identifying the most critical process or system within the organization that directly contributes to creating value for customers. Next, it’s essential to pinpoint the specific issues within that process and define a solution that is acceptable to all stakeholders. A cross-functional team made up of individuals who are involved in the process on a daily basis should then be assembled to conduct a comprehensive, 360-degree analysis of the problems and opportunities for improvement. The team should work on developing multiple scenarios—whether new approaches, additional steps, or even eliminating unnecessary steps—to enhance performance. Finally, the team should agree on which scenarios to test and adapt, continuously gathering feedback and making improvements until the desired outcome is achieved.
Moreover, complexity tends to inhibit innovation. When teams are bogged down by bureaucratic red tape and convoluted workflows, there is little room for creativity or experimentation. Innovation thrives in environments where ideas can be tested, refined, and implemented without unnecessary obstacles. By contrast, complex systems often require multiple approvals, detailed justifications, and significant time investments, all of which can stifle the creative process.
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The Power of Simplification
Simplification, on the other hand, is a powerful tool for enhancing focus, engagement, and innovation. By stripping away unnecessary layers and concentrating on what truly matters, organizations can create a more agile and responsive business model. Simplified processes are easier to understand, manage, and optimize, allowing teams to direct their energy toward activities that drive value.
One of the key benefits of simplification is increased focus. When employees are not distracted by cumbersome procedures, they can concentrate on their core responsibilities. This focus not only improves efficiency but also boosts engagement, as employees are more likely to feel empowered and motivated when they have a clear understanding of their roles and how they contribute to the organization’s goals.
In fact, I happened to experience a drastic change in business focus within a sales and marketing department of a big FMCG company recently. The company was operating differently on each business units of a multi-category businesses company, but within one of them was a further breakdown on their operating business model where basically there was 3 models available that were eventually servicing the same end customer. The lack of internal focus was clearly impacting customer satisfaction, the company’s performance against its competitors and also the financial performance against its targets. A need for streamlining these 3 models into a singular business model was high in the agenda, and after many rounds of discussions, an agreement was made to proceed with a project of restructuring and remodeling. The results were gladly accepted by all stakeholders involved especially from its employees and customers.
Simplification also fosters a culture of innovation. By removing barriers to creativity, organizations can encourage their teams to think outside the box, experiment with new ideas, and take calculated risks. This is particularly important in a business environment where innovation is the key to staying ahead of the competition. Companies that prioritize simplification are better positioned to explore new opportunities, develop innovative solutions, and adapt to changes in the market.
The Role of Innovation in Success
Innovation is not just a buzzword; it is a critical driver of success in today’s business world. As markets become more competitive and customer expectations continue to evolve, companies must constantly innovate to stay relevant. However, innovation is not possible without a culture that supports it. This is where simplification comes into play.
By simplifying processes and removing unnecessary barriers, organizations create an environment where innovation can flourish. Teams are more likely to experiment with new ideas, take calculated risks, and develop innovative solutions when they are not hindered by complexity. Furthermore, simplification allows organizations to implement new ideas more quickly, reducing the time it takes to bring innovations to market.
In addition to driving innovation, simplification also supports long-term growth. Organizations that embrace simplification are better equipped to scale their operations, as they can do so without the burden of excessive complexity. This scalability is crucial for companies looking to expand their market share, enter new markets, or diversify their product offerings.
Embracing Change and Leaving the Comfort Zone
Success in business often requires leaving the comfort zone and embracing change. This can be challenging, especially for organizations that have grown accustomed to their existing processes and systems. However, those who are willing to confront complexity head-on and simplify their operations are better positioned to achieve success.
Change is not always easy, but it is necessary for growth. Companies that cling to outdated processes and resist simplification risk falling behind their competitors. On the other hand, those who embrace simplification and view complexity as an opportunity for improvement are more likely to thrive in a rapidly changing business environment.
Conclusion
In conclusion, complexity can be a significant obstacle to success in today’s business world. It limits an organization’s ability to adapt, stifles innovation, and creates inefficiencies that can hinder growth. Simplification, on the other hand, increases focus, engagement, and innovation, all of which are essential for long-term success. By embracing lean design and fostering a culture of innovation, organizations can overcome the challenges of complexity and position themselves for continued growth and success. In the end, those who simplify are not just better equipped to survive—they are better positioned to lead.