Every business begins with a single product, a single segment, and a single way of going to market. Then growth begins, bringing new opportunities, new customer segments, new geographies, new product lines, new businesses, new channels of distribution, and new services. These are the bright, shiny objects of business: they provide immediate gratification and energy.
Yet they also add complexity, and that leads to what we call the complexity doom loop: unchecked complexity silently kills growth and sucks energy from the organization, creating tired leaders. And tired leaders become distracted from their key mission of translating strategy into simple actions and routines at the front line of the business.
Complexity Can Be A Strength, More Often It’s The Villain
Complexity doesn’t have to be a negative. Multinational businesses with complex product portfolios, are after all, geared to serve complex customer needs. Managed effectively, that can actually be a competitive advantage. Consumer goods companies that can efficiently serve the complex needs of multinational retailers gain a crucial edge on those that can’t. Construction companies adept at delivering bespoke solutions to solve convoluted customer demands can command higher margins.
Complexity, a central villain in our book, is obviously not homogeneous. It differs within and among organizations, and needs to be attacked at a variety of different levels. But here’s the point: to survive the southward winds, companies need to make complexity reduction a way of life.
Companies that do this have flatter organizations that put leadership closer to the customers, better maintain the founder’s mentality, and achieve more sustained profitability.
Steve Jobs recognized this. That’s why, on his return to rejuvenate Apple, he focused first on the reduction of complexity in organization (he consolidated some departments), in product line (he eliminated 70 percent), in research (reduced to a handful of projects), in design (simplicity became a mantra again), and in the supply base (the number of suppliers was cut from a hundred to twenty-four). “People think being focused means saying yes to a thing that you have to focus on,” he said in 1997, at the Worldwide Developers Conference held annually by Apple. “But that’s not what it means at all. It means saying no to the hundred other good ideas that are out there. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things we’ve done.”
Contributed to Branding Strategy Insider by: Chris Zook with the permission of Harvard Business Review Press. Excerpted and adapted from The Founder’s Mentality: How to Overcome the Predictable Crises of Growth.
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