Simplifying Complexity
As a graduate student, I worked as an intern at a large
corporation. Into my second week, I had collected data on a project and wanted
to place the papers in groups based on processes. When I requested my mentor
for a few paper clips, I had my first experience with complexity.
While handing over
the paper clips, my mentor told me that to get a box of paper clips, the
organization required 17 signatures!.
Ever since I have
been intrigued and baffled at the complexity
that is an integral part of modern organizations.
On the one hand, the advent of new technologies at a pace that could not have been imagined even
at the turn of the century, new entrants more than willing to disrupt traditional frameworks and
mindsets, and the changes in customer
expectations, have combined to produce an unstoppable force.
One would expect organizations to seize
the opportunities and move forward. The twin factors that can provide a
competitive advantage in today’s business landscape are agility and adaptation.
Few businesses show the characteristics
needed for speed and change. On the contrary, the typical response is for more
processes, endless meetings, brainstorming, disengaged employees, and ever
escalating costs.
Why is there such a disconnect between
what is needed and what happens?
First, very rarely do organizations try to figure out the cause of any problem. The classical approach is to
look at the symptoms, not the disease itself. It is like applying a band-aid to
an ever enlarging sore.
Second, organizations typically argue
that the problem lies elsewhere – in
regulation, in the economic environment, in political uncertainty, in unfair
competition – and never within the organization itself.
Third, it is hard to measure certain problems. As an example, when was the last
time you came across anyone in your organization questioning the cost of time
wasted on unproductive meetings?
An Atlassian
estimate places the amount spent on unproductive meetings at US$ 37 billion
per year (2016). A Harvard Business
School app quickly shows that in a typical organization, an hour’s meeting
attended by 20 people is over $1,000 in opportunity costs.
Finally, organizations are in the comfort
zone owning “collective responsibility”
for everything. In other words, there is no ownership and hardly any
accountability.
The Boston
Consulting Group’s Smart Simplicity
approach has two key principles:
1. Performance is a
function of what people do (behavior).
2. Behavior is a function
of people’s rational responses to their context.
Thus, Smart Simplicity tries to make desired
behaviors rational.
Observed behavior, and not an assumed
ideal state (what people should be doing), needs to be the focal point.
For organizations that embrace
simplicity, the rewards are significant. Large organizations report
order-of-magnitude benefits achieved through simplification. In my experience,
I have seen concept-to-market cycles shrinking by 25%, costs being reduced by
30%, and revenues going up by 15%, all due to simplification.
Organizations can simplify their
processes through a four-step approach:
1. A “complicatedness
survey” that identifies the processes that show built-in characteristics of
complexity.
Example: In the physical
world, customers willingly scan the shelves of supermarkets to find what is
best suited to their requirements. In contrast, in the digital world, customers
are extremely impatient for results. If a prospect visiting your web page
cannot find what she is looking for in the first five minutes, she is likely
to give up the effort and start looking
for alternatives.
A significant part of
complexity starts with the leadership
team. A team that focuses on providing the “best possible solution” invariably ends up having complex
processes. Instead, it may be prudent to start with a “good” solution and make
it better on a continuum.
2. Diagnose the root
cause. Admittedly, this is the most
difficult part.

Example: When Paul O’Neil took charge of ALCOA, his first message to
shareholders had a single focus – employee
safety. Petrified investors rushed out of the meeting to sell their shares.
A few years later, ALCOA had regained its position in the industry.
Counter-intuitive as it may seem, the focus
on safety reduced accidents, empowered employees, dramatically brought down
attrition, and increased productivity
to record levels. Obviously, those who had sold off their shares had to regret
the decision.
Organizations can
identify the root cause if and only if they are willing to take a deep dive
into socio-cultural contexts in
which they operate. Such a soul
searching requires enormous courage
and the willingness to go against the tide of conventional wisdom.
3. Test-drive. Just as rapid
prototyping is the preferred route to innovation, organizations should take
up pilot projects to test-drive
simplicity.
Example: Toyota
considers more designs than its US and European counterparts and yet can shorten
the concept-to-market cycle to 18 months compared to 4 years for competitors.
The magic is in its now-famous production system that adopts a “pull” design and carries no inventory
in contrast with major manufacturers who even today rely on a “push” system and loads of inventory.
The Swedish furniture maker Ikea has successfully replicated the
system resulting in close-to-zero waste and extreme modularity in design. Logs of wood go through a “scan” to
determine the most appropriate way of slicing them.

4. Implement: Once a pilot project is tried and adjustments made as
required, organization-wide implementation is the logical final step.
Example: The first Indian company to reach both CMM Level 5 and PCMM Level 5 in software technologies achieved the incredible feat
in 18 months. The secret was to de-layer bureaucratic approaches and empowering middle-level managers to do
whatever was required, within a broad set
of core values, to achieve the desired
results.
The organization that I
referred to in the opening paragraphs was able to achieve a 60% increase in ROI
by simplifying processes across the board.
The message is clear. In a world where organizational life-spans are shrinking,
and turbulence is a given, only those
that can embrace simplicity will survive.
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