Mastering Complexity Through Simplification: Four Steps to Creating Competitive Advantage

February 16, 2017 by Jaap Backx, Christoph Hilberath, Reinhard Messenböck, Yves Morieux, and Henning Streubel

It is very important to read the full article to appreciate the richness of this approach

Businesses compete in a world that is growing ever more complex. Disruptive technologies emerge with increasing frequency. Customers’ needs and demands change at breakneck speed. New competitors are always entering the fray.

In their attempts to reduce uncertainty and reestablish control amid this new complexity, companies tend to introduce new reports, new rules, and new processes. Such reactions, however, simply translate external complexity into internal “complicatedness”—the counterproductive proliferation of cumbersome structures, processes, and systems. Complicatedness hinders productivity by creating a work environment that leaves employees disengaged and unmotivated. To be successful in today’s complex and fast-changing world, companies must be highly agile and flexible—able to identify opportunities and make informed decisions quickly in order to exploit those opportunities. Those companies that are able to hone that agility in the face of increasing external complexity will emerge with a clear competitive advantage.

Smart Start. The first step is the identification of the performance issues and the symptoms of complicatedness. A company should not simplify itself only for the sake of simplifying. Simplification is for companies that aim to tackle concrete performance gaps currently caused by complicatedness. The performance issues need to be measurable, and the benefit of addressing the problems should be clear, quantifiable, and worth the energy expended.

In this step, performance concerns—for example, a slow pace of innovation and the loss of market share—are linked to obvious symptoms of complicatedness. This step typically includes a “complicatedness assessment,” which examines the eight context dimensions to identify the symptoms and level of complicatedness, as well as bench marking against other organizations to establish a baseline of the system at work in the company. In the end, senior managers must reach agreement on the answer to the key question: What are the issues or problems caused by complicatedness that we need to solve?

Diagnosis. This step focuses on achieving a clear understanding of what is causing the performance issues, through in-depth analysis of behavior (what people are doing today) and the context (why they do what they do). The goal is to determine precisely the root causes of complicatedness.

This is generally achieved by defining five to ten use cases, for example, the procurement process that illustrates poor alignment among finance, engineering, and manufacturing. Each use case needs to be clearly linked to a specific problem area or process. Taken together, the use cases should encompass most of the identified performance gaps. In discovering what drives the behaviors of individuals in particular roles in these use cases, we get a good sense of the context changes required.

An analysis of behaviors is done through socio-organizational interviews with the key stakeholders. Furthermore, a context diagnostic is conducted in order to understand the link between context and behavior. These two analyses should provide a rock-solid understanding of the root causes of the performance issues. That insight will establish a concrete rationale for the identified interventions—changes designed specifically to adjust the context in order to remedy the performance issues.

Solution Design. This step focuses on changing the context to make desired behaviors rational. The central question at this point is, What targeted interventions will address the root causes of the performance issues and thereby eliminate complicatedness? This determination is based on the necessary context adjustments that are identified through analysis of the five to ten use cases and the understanding of the required target behavior for each use case. Since interventions are designed for concrete use cases, they are very specific. For example, one adjustment may be to change the performance review process to make behavior X logical for employee Y in a specific situation. Such targeted adjustments have greater and longer-lasting impact than changes made on the basis of industry best practices.

Implementation. The fourth step focuses on implementing the solutions and ensuring that they are sustainable and can be improved continually over time. This involves prioritizing solutions and creating an implementation road map. An activist project management office (PMO) with clear authority to drive the process, challenge proposed solutions, and make decisions on trade offs is a key factor in this phase. To lead its simplification drive, the global machining company described above created such a PMO.

The enablement of company leaders—essentially educating them and giving them the tools for thinking and acting with a Smart Simplicity mindset—is a critical aspect of lasting change. This ensures that the organization will cope with challenges and uncertainty with intelligence and insight. Successful implementation yields improvements in performance, productivity, and employee engagement.