The Art of Business Simplification
Many companies suffer from layers of complexity that impact performance
To stay competitive it is important to constantly find ways to simplify cost structures, customer propositions, processes and flows in the business
5 factors are important to get business simplification right: Clear ambition, connection to value, using a best practice framework, managing change carefully and incentivising simplification
The curse of growing complexity in business
Most companies today are operating on a global or at least regional scale. Access to global markets, rapid advances in technology and the emergence of outsourcing partners have added complexity in many organisations. Layers of processes, long decision-making processes and IT systems swell to create an overload of complexity.
The main symptoms of an overly complex organization are:
– Low effectiveness and efficiency
– Lack of transparency
– Lack of responsiveness and agility
– Duplication of processes, extra process layers, process gaps. This includes the occurrence of multiple process variations, where it is not clear if the value of the variation exists
– Low ability to capture digitalization opportunities, as processes are not ready for automation
– Reduced ability to integrate strategic acquisitions
Where to get started with business simplification
When companies start to talk about reducing complexity, they typically want to address one or more aspects:
Price simplification – Identifying ways to reduce the cost of producing goods or providing services
Proposition simplification – Identifying ways to offer products and services in a simpler way
Process simplification – Identifying ways to standardize, harmonize or unify processes across the business
Flow simplification – Identifying ways to reduce inefficiency and ineffectiveness in daily business conduct
While there is no standard approach to business simplification, most companies are driven by competitive pressures to tackle one or many of the dimensions above.
5 factors are important to capture value from business simplification
Trying to tackle business complexity without a clear vision of the future state, tools and efforts to change minds will reduce the effectiveness of business simplification efforts.
Based on various client projects and continuous research efforts, we see 5 success factors to capture value from business simplification:
Define ambition and scope properly – What we see in our business simplification work with customers is that initially the ambitions and scope of the project are not clear. Without clearly defined ambition and scope, it is difficult for the teams to get the right interest and leverage for the activity across the organisation.
Connect back to the dimensions of value – Many attempts to simplify the business start at the Business Process or IT Systems level. While this is indeed the place where the ‘day to day business’ happens it is often difficult for managers to connect the simplification activities with the value it creates for the business. Simplification, Harmonization or Unification of Processes and Systems don’t make sense in isolation. To have a way to prioritise simplification opportunities they need to be ‘connected to value’, which means tying them back to the strategic objectives of the company.
Use a best practice framework as a catalyst to get started – Use a process framework like the Supply Chain Operations Reference (SCOR) model to simplify processes. The standardized process descriptions, definitions and metrics are a good lever to move from opinions to facts during the simplification process. Reference models and best practices are typically the results of many years of improvement and shared learning across the community of practice.
Manage change carefully – Business complexity is an abstract concept for most employees in a company. While individually employees can articulate what they would like to get simplified, not everyone in the organization is able to apply process thinking or understanding root causes of complexity. It is hence important the team that is tasked to simplify the business is able to articulate how people, processes and systems are contributing to the complexity and how changes in behaviour will help to simplify the business.
Reward efforts to simplify – Simplifying the business should not be a one-off effort or ‘a project’. The best companies are able to create a culture of simplicity, often incentivising all employees to constantly identify and implement opportunities to simplify the business.
How is your company tackling complexity and what are your learnings from business simplification?
How we can help
Learn more about our Business Simplification Service at shared.value.chain