Cost of Complexity

 

​

Many organizations brag openly or implicitly to the fact that they are complex by nature or design and that the level of specialization is such that they feel they stand in high grounds while the world is looking up to them.

Unfortunately for these types of industries and companies complexity is one of the biggest targets for new businesses and startup companies, as the world evolves and technology continues to be present in many new ways with a huge plus, making things simpler, more accessible, faster and intuitive rather than hard rock and inflexibly defined.

 

Some things we already take for granted, like having a cell phone to the reach of our hand to talk to mostly anyone, to instantly being updated on what is happening around the world and see where trends are going on things that a few years back were not of interest or unknown at all. Getting a taxi is something you can do in less than a minute with applications such as Uber and Lyft, making travel arrangements is easy and fast and options are many for you to browse and decide at your own pace and to your own likes.

 

On the other hand there are processes that are complicated by design, the most common examples are those related with government entities, finding out what to do, what forms are the right ones to use, what supporting information is necessary (aside from understanding why some of that supporting documentation is necessary at all), and the most annoying of them all, the time it takes for processing once you believe you got it right.

In the middle of the fast and easy way of doing things and the burden of dealing with government agencies in any country we find a very interesting spectrum of privately and publicly held companies that have a degree of unnecessary complexity.

 

Many organizations operate believing that the way things are done internally comply with their mission statements of productivity and continuous improvements, unfortunately, that is not always the case, when status quo is challenged and solid arguments are made, some pretty unbelievable facts  are uncovered, and this has nothing to do with the capacity, skills or abilities of the people working under these conditions day in and day out. It is mostly an issue of not having the visibility and perspective to go against the flow and the routine under which they regularly operate.

Cryptocurrencies are on its way to wipe out many of the international revenues that banks collect on fees and exchange rates, that is a clear target and unless financial institutions react quickly and creatively they have much to lose. Many banks are heavily invested in technology and unfortunately what sometimes happen is that inefficiencies and complexity land in the algorithms that stay in place.

 

By definition no process has to be complex, actually no process is ill defined from the start, it is corrections and quite often ‘enhancements’ that make things complicated, misunderstanding of legal and government requirements, unbalanced authorization levels and accountability are mostly at fault.

 

Cost reduction and cost optimization is in the top of mind for the C-Suite, that is undeniable, strategies are discussed, assessed and approved to capture cost savings opportunities nonetheless when those are brought to their execution more than two thirds of them fail at delivering and as many as 90% don’t get even close to the targets defined in the strategy, again the single most critical reason is a poor execution of these strategies.

 

Another common problem is to always look at the very same line items in the very same way in order to try to reduce costs. Eventually, if not correctly assessed and diligently implemented some initiatives end up irreversibly damaging the core of the business, identifying and capturing opportunities that have been untouched takes decision, courage and a nothing to lose unbiased mentality which makes it a combination hard to find within the internal ranks of any organization, this is where an outside perspective provides its greatest value.

 

Whenever you come across any part of the business that finds ways to maintain the status quo, intervenes in multiple processes with no direct accountability and requires attention from multiple sides of the business then it is probably a complexity generator that needs to be looked into, one mistake that is recurrently found is that areas and or processes that have a marginal budget are defined as one not requiring much attention or improvements as the direct costs are being allocated elsewhere, sometimes these areas or processes create unnecessary complexities that cost millions of dollars in loss of revenue, process delays, obstruction of innovation and inhibition of growth to name a few.

 

Understanding what is complex might not be an easy task, you might not even consider something to be complicated if you are too familiar with it, some of the largest corporations today did not exist ten years ago and were not even considered competition until they came to the market with a view for making things simpler, faster and eliminating intermediaries that others thought were necessary.

 

Assess your business in a holistic way, take unbiased opinions, get outside views and opinions and challenge the status quo, or someone else will do it for you, when your business needs stretching and internally the belief is that everything possible has been done or has failed is probably the best indication that you are in your way to obsolescence.

 

As a final thought bear in mind that if something is complex then it is most likely unnecessarily expensive. 

 

By: Cristopher Del Angel, CEO at To The Top Management Consulting