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?
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
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,
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.
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.
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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