The Challenge: What To Do About It?

First, recognize that rampant proliferation adds to costs in a manner that goes untracked. Then track it down. Where it adds value, alter processes to accommodate it. Where it doesn't, which is most places, stop it. Reduce or eliminate it. And institute safeguards—systems and metrics—to prevent its unnoticed return. Most of all, find quick and easy ways to describe The Complexity Crisis so it is recognized as a potential profit drain, and managed like the critical business consideration it has become.

The Premise: What Gets Measured, Gets Managed.

To understand the success factors in business is critical. To understand the obstacles that get in the way is equally important. This is the purpose, indeed, the job of management. The tools used that allow management to do this job are metrics and then the actions that result when the metrics expose an area for management attention. The good news—many of the necessary tools already exist, and may be in use. The bad news—complexity is, by its very nature—"complex" and thus it defies many existing measurement techniques.

 The Approach: Find it; Fix it; "Use It or Lose It" (and Keep It Simple)

First, recognize what constitutes complexity and the hidden costs it creates; the places it siphons off profit into blind alleys and hidden corners of the business. Next, find it in your business and decide if it creates or destroys value for customers. Then, decide to either " Use It"—change structure and processes to accommodate value-added complexity for competitive advantage, or "Lose It" and reduce or eliminate non-value added complexity wherever it has crept into your business. Finally, institute new metrics and modifications to existing cost and management control systems to choose when to keep it out, and when to capitalize on complexity. Last, and most important: Keep the management of The Complexity Crisis as SIMPLE as possible, so whether you "use it or lose it" you solve the problem and keep it solved.

 
Excerpts

p. xiv, Introduction:              Businesses must compete in more complex global markets than ever before.  Most companies are seeking double-digit growth in markets growing at low-single-digit rates—or not growing at all.  This quest for growth has led to runaway complexity caused by the proliferation of products, customers, markets, suppliers, services, locations, and more.  All of these add costs, which go untracked by the best of modern accounting systems.  Complexity also fragments management focus, wastes time and money, and ultimately reduces shareholder value.  The problems grow, but remain under the radar of management attention.  Complexity is arguably the most insidious, hidden profit drain in today’s business world. 

p. 206, Ch. 20, The Big Picture:     While capacity can spring up almost anywhere and faster than ever, demand is not so elastic.  Demand exists where there is wealth, needs, wants, and purchasing power.  This demand is a much harder beast to corral.  Finding high growth demand in a low growth (developed) world is hard; sometimes it is impossible.  There is great demand in the under-developed parts of the world, but little purchasing power to go with it.  Thus it is a devilish choice: go after markets where the money is, but where intrinsic growth is low or zero, or go after huge potential markets where there is precious little money to pay for the goods, thus stifling growth a different way.

            The solution for too many companies is to sell everything, everywhere, every way they can, and in doing so, these companies drown themselves in complexity.  And there is no measurement system to warn them, or even to tell them it is happening.  They learn after the fact.    At the end of the accounting period, managers feel like they have arrived at the scene of a crime—right after it has been committed—and the money and the perpetrators are gone.