Creating unnecessary complexity in your company can be a business killer. It quickly leads to a lack of focus, which in turn leads to lost opportunities. Understanding what your organization’s true capabilities are and focusing resources to create business value is a basic premise of strategy management. While most CEO’s understand this basic principle, business leaders seem to go through cycles of expansion that add complexity, and only after a period of underperformance, they are forced to retrench to focus on core strengths.
Steve Jobs is a great example of a CEO that understood the worth of focusing on a few things to create value. When Jobs returned to Apple after his success with Pixar in 1998, there were 350 apple products. He proceeded to reduce it to 10, which allowed Apple to leverage its core capabilities and accelerate growth. Is your performance being held back by complexity?
Here are a few of examples where our clients effectively reduced complexity in their businesses:
• A mid-market B2B company decided to explore divestment of one of its oldest product lines. The leadership team concluded that this long-standing product line had limited future potential and was becoming a drain on company resources. As a result of the decision to exit the product line, the company could turn its attention to technology driven solutions that were experiencing rapid growth.
• A consumer products company struggled to participate in two very different market segments, and division managers were constantly competing for resources. The leadership team decided to restructure into two separate standalone companies that ultimately provided a more balanced approach and greater value over the long-term.
The challenges that Covid-19 has presented to middle market companies has forced business leaders to make strategic choices to maintain performance in the short-term and return to growth over the long-term. During this time of unprecedented change, the potential to add complexity is heightened. We are advising leadership teams to find time to manage the level of complexity added by this Covid-19 environment.
Reducing complexity is not necessarily the answer for everyone. Some industries and companies have created business models that have been successful in dealing with complexity. However, we recommend business leaders think strategically about growth and challenge the level of complexity underlying those decisions.
Consider what Peter Drucker said, “The less diverse a business, the more manageable it is. Simplicity makes for clarity. People can understand their own job and see its relationship to results and to the performance of the whole. Efforts will tend to be concentrated. Expectations can be defined, and results can easily be appraised and measured. The less complex a business is, the fewer things can go wrong.” (From Drucker’s book: Management: Tasks, Responsibilities, Practices)
Written by: Dick Albu, President & Founder, Albu Consulting & Rob Krist, Managing Director, Albu Consulting