80% of Global CEO’s believe that complexity in business – across decision
making, business process, and technology consumption is crippling their ability
to grow their business. Despite abundant data, it is hard to make informed
decisions. Decaying business processes designed in the past are no match for
future business requirements and IT departments are struggling to keep pace with
innovative new technologies. If we focus on non-value creating complexity,
there is a significant amount of value leakage that can be eliminated. Many
studies document the potential value of reducing complexity within businesses.
Below are just a few examples that validate the missed opportunities:
- Increase in revenue growth from 5% – 40% and cost reductions of 10% – 35%
with companies better managing complexity – Bain & Company - 30 – 50% growth in companies with the lowest complexity when compared to
average organizations – Bain & Company - 3-5% growth in EBIT with systematic complexity management – A.T. Kearney
That being said, there are organizations which are addressing complexity
within their business. For example, eBay was facing the challenge of not being
able to understand customer product feedback in a reasonable timeframe as a
result of manual processes. eBay leadership recognized that they would need to
simplify the analysis, make it easy to assess the enormous amounts of data and
provide quicker access to the data to drive decisions. This resulted in the
ability to analyze and resolve errors from 1 month to 1 day. Another great
example is that Medtronic was able to simplify the analysis of clinician and
patient data while helping to connect customers to the right products and
therapies. The actual analysis of the raw data reduced from 3 hours to 3 days
allowing them to focus more on providing their customers with the service they
expect.
The key characteristic was that the leadership teams at both of these
companies were able to make strategic decisions which would lead to
simplification. Lisa Bodell, the founder and CEO of FutureThink said it well
when she stated that “Managers need to develop simplification as a core
leadership capability and [it] is a critical component of the business strategy.
“ It is extremely important for management to drive simplification requirements
in order to achieve the value desired.
How would you describe leadership’s role in managing complexity within your
organization. Knowledge @ Wharton and SAP are conducting a survey on
Simplification and are looking for your thoughts on where your company is
headed. For your participation, you will receive a Wharton Digital Press
e-book.
https://valuemanagement.sap.com/VLM/?ID=483&isNewUI=1&SurveyLanguage=English
