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The hidden costs of complexity

Darren Rushworth, Managing Director of Singapore, SAP | June 3, 2015
Big returns and better performance await companies willing to strip away the complexities that prevent them from competing with faster, leaner challengers.

This vendor-written piece has been edited by Executive Networks Media to eliminate product promotion, but readers should note it will likely favour the submitter's approach.

Global corporations must watch the startup activities in the Silicon Valley the same way a Jack Russell looks at Dobermans. "You're not even my species."

The startups have an agility and flexibility that their larger, established brethren crave, but they are weighed down by complexity. In fact, the top 200 global companies lose 10.2 percent or $237 billion of profits due to the hidden costs of complexity (Global Simplicity).

Complexity hides throughout organisations indecision making, business processes, and technology. Complexity is so insidious that it prevents organisations from bringing good ideas to the marketplace profitably, and it wastes time. According to BCG's Complexity Report, large organisations can spend between 40 to 80 percent of their time on non-value added activities.These companies are working harder, but not realising results because they are spending time on activities that deliver marginal value to the organization.

Left alone, complexity doesn't get easier. Companies just get used to it. But a willingness to endure doesn't lead to a competitive advantage in a digital world where 90 percent of the world's data was generated in the last two years and business networks are expected to grow by 40 percent, where 9 billion people are mobile, and 212 billion "things" will be connected.

Business Transformed by Simplicity
A new rule of order, where simplicity takes center stage, is fundamental to business success in the digital age.In a business run with simplicity at its core, business managers from throughout the organisation make decisions in the moment with less effort and more impact. Here's how the transformations start.

At a large telecommunications firm, a regional sales manager is mapping outleads for the coming quarter. He initially decides to target a big sales deal for a government agency that looks like impressive numbers, until he runs a real-time forecast of the project's profitability, analysing the deal structure, profit, and margin. He aggregates the data from his mobile device without sending a request out to a business analyst and waiting for a response.Instead, he immediately gets the insight he needs and realizes thata smaller sell has much higher margins. He can improve the company's overall financial health and bring more value to the company with less effort.

Similar in-the-moment business decisions are anticipated in the food industry where engineers are developing the best chip to dip or the tastiest cookie with the fewest calories. These engineers need information from multiple business units, including focus group feedback, ingredients information, costs, and more, to turn the testing into a product ready to go to market. The data is not neatly stored in one system or even in the same format. But the disparities don't slow the process, the engineer continues testing and improving his product until he has a winning formula.


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