Choose Innovation Over Complexity

By John Mariotti

“Innovate or die” is a commonly used phrase to describe the urgency of innovation to drive growth. But there’s a problem, which most managers commonly cite: “We have no time or resources left for true innovation. We’re buried just supporting our day-to-day business and solving problems.”  These are common complaints in businesses and industries all over the world. Everyone agrees that innovation is the path to future success, but only a few companies, such as Apple and Proctor & Gamble, seem to get around to it or devote enough time and resources to finding the big breakthroughs. Why is this the case?

The answer is, in a word, complexity!  Companies around the globe are reeling from self-induced complexity. In their frustrating search for high growth in low growth markets, they have substituted proliferation for innovation. They have proliferated everything – products, customers and markets – but innovated in virtually nothing. The result is a tidal wave of extra work that leads to huge, hidden costs. Complexity costs hide in places that modern accounting systems use as “catchall accounts” where no cause is easily determined.

Are you drowning in complexity? Does it seem “the faster you go, the behinder you get?”  Is overhead up and are people still straining to keep their heads above the piles of work? If so, it’s time to run down the causes of these problems and find some solutions.

Investigation reveals that most complexity is due to undisciplined expansion in many areas. Because there are few to no metrics to track complexity and its adverse impact, it continues to fly below the radar, costing companies millions and in some cases, billions. Worst of all, it keeps people from working on the most important, highest-potential opportunities.

The good news: There are solutions to these problems. The better news: There are tools and techniques that help in new and better ways. The best news: Once complexity has been exposed and managed – either driven out, or put to good use – there will be more resources, more time and more money to devote to innovation. The path to truly profitable growth is through innovation in products, processes, methods, and strategies … so let’s talk solutions.

Solution I: Conquer Complexity – “Sort & Simplify” to Focus on the Future: There are two approaches to dealing with complexity. Some use complexity to great advantage, streamlining processes and using a high-variety, high-value strategy. Others must get rid of it to free time and resources for better uses. The key for both is “sort and simplify,” then “focus on the future.”  Sort products and customers’ annual sales and profits in descending value order and calculate the cumulative percentage contributed. It’s no surprise if you find the top of the list – 20-25 percent of the items or customers – generates most of the sales and profits. The bottom 20-25 percent of the list is populated with mostly “losers” that generate very little in sales or profits. Get rid of them, but not indiscriminately. That’s the key point of developing a sixth sense.

Solution II: Use a Sixth Sense to Engage Customers & See the Way : You know that most of those bottom dwellers are losers that need to be dumped. However, a few of them are high potential future “stars” or important niche fillers in an overall product line or market segment. A new, improved approach is needed. Just as we use our five senses to evaluate our surroundings, it’s necessary to develop a “sixth sense” to use in this case. Our senses help us make decisions based on our environment. Using this sixth-sense process will help identify what is important to customers and consumers, both current and prospective.

The problem: This is easy to say, harder to do. Customers’ decisions are based on complex considerations that even they usually don’t fully understand. Too often companies deal with this by trying a little (or a lot) of everything, and the result is that a few tries hit the target.  Most of them miss and lead to more complexity.

This sixth-sense process is critical to sorting the few winners from the many losers at the bottom of the list.   It also helps reinforce why many of the big winners are so successful, adding insights that will create more winners. The key is to make the use of this process routine; engage customers and translate their desires, wishes and preferences into the best kinds of products and services to offer. Sort and simplify first, and then engage customers next. Clean out the bottom of the list wisely, and do it several times each year. Suddenly, instead of creating complexity and waste, you are eliminating it by carefully targeted solutions. What’s next? Now it’s time to solve the stickier problems.

Solution III: Optimization Solves Complex Problems: Sometimes the solutions must address more complex situations. Typically, when there are many available options (e.g., accessories on a car), the question becomes how to plan for them. Accommodating all variations is wasteful since few cases result in every available option being selected. Accommodating each uniquely is also wasteful; it leads to enormous variety and no volume-cost advantage. Whereas many cases of complexity yield to the “sort and simplify” or sixth-sense approaches, these situations require a different solution. The key here is optimization.

Optimization is something we do every day, such as deciding which route to take to work, based on time, traffic, etc. Which phone features to buy is another example. We estimate our usage of the features and “optimize” by purchasing a plan that meets most of our needs. To handle a large number of variables (as in the auto example), computer algorithms analyze the choices. Fortunately, such solutions exist. Rather than guess, or err to either extreme, it’s better to use proven methods to reduce unnecessary complexity, and make the optimum choice.

Result: Time for Innovation—The Best Path to Growth: We have come a long way just to get back our starting point:  innovation for growth. Complexity creates obstacles, and if not contained, consumes (wastes) so many resources that none are left for innovation. If the true nature of complexity is understood, decisions can be made on whether to create a high-variety, high-value strategy (“use it”) or one that drives out wasteful complexity, simplifying work and reducing waste (”lose it”).

Fortunately, after sorting and simplifying, new solutions help understand the customers’ motivations, and then optimize their choices. Now that you see the path, the decision is easy. It’s time to move from drowning in complexity to focusing on the future, through innovation for profitable growth. Remember, business is a game where the score is kept in money, and the winners get to play again.   Choose innovation over complexity and make sure you are one of the winners!

Read other articles and learn more about John L. Mariotti.

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