Wherever you look nowadays, companies are declaring a war on complexity. According to a recent global study of 1,500 CEOs conducted by IBM, the biggest challenge CEOs face is the so-called complexity gap. Eight out of 10 leaders expect the business environment to grow in complexity, but fewer than half feel prepared for the change. Boiling it down, it’s not so much that CEOs hate complexity; they hate running organizations that are so big that they cannot understand everything that is going on and where the bottlenecks exist when it comes to execution. In a reaction to a question on increased complexity, I’ve recently heard a CEO say, “Whenever I push the pedal down to the floor, it takes a good two or three months just to get things going”. When you take into consideration the accelerating pace of change and pressures exerted on companies nowadays, it isn’t difficult to see why senior executives are frustrated with complexity and are taking charge to simplify, fast.
Over the years, we’ve been accumulating complexity and clutter in many forms. Many corporate cultures still promote self-interest, which effectively leads to more silos, fiefdoms and kingdoms. The mantra of “bigger is better” still reigns in many organizations and applies everywhere from the size of a leader’s team to a sense of pride in the volume of work or “busyness” that a team takes on. If we can’t solve a problem between two departments, we create “middle offices” and coordination roles with new leaders and teams to solve inherent organizational problems. Add to that the substantial time spent in meetings, an exploding volume of email and growing stacks of internal processes and you quickly start to see why companies are working much harder then in the past, yet seeing the average return on assets (ROA) at just a quarter of the levels we’ve seen in 1965
With complexity hindering agility and customer experience, simplification is becoming a major topic for many large companies who are striving to effectively compete with disruptors and remain relevant in their respective markets. General Electric is introducing a “culture of simplification” as part of a plan to cut overhead from a peak of 18.5% of revenues in 2011 to 12% in 2016. GE’s CEO Jeff Immelt sees simplification as making GE more competitive and alleviating risk of the inability to seize market opportunities. Siemens is wiping out a whole management tier and reducing the number of divisions below it to streamline decision-making and speed up execution. At SAP, we’ve adopted a simplification mantra for everything – from internal structures to the way that products are designed and brought to market.
Simplification, however, is easier said than done and takes much more then removing organizational layers and running corporate initiatives to identify topics to simplify. Today’s modern organizational mechanisms are designed for taking complexity across divisions, countries, products and people and making them function in a scalable manner. Invented in the 20th century, most organizations are thoughtfully designed to reduce risk while increasing reliability and scale. This means hierarchies, silos, putting the right people in the right jobs; operating budgets and business plans are the norm. When we face business problems that don’t necessarily fit in our “current boxes”, we tag on new functions, interdepartmental initiatives, committees and work streams, all of which are intended to fix and mainstream the issue, alas adding to complexity.
Simplifying the organization to operate with agility and speed represents a major cultural shift, an opportunity to rethink almost everything. Most importantly, new individual and leadership capabilities that are required to create and sustain a creative organization committed to adopting simplification as one of their core mantras.
Culture of Questioning
A fundamental step to simplification is to challenge the status quo. Questions such as “Why are we doing it this way?” and “Is there a better way?” need to become recurring themes during the course of doing business. Looking at things with a fresh perspective brings to light a slew of opportunities to simplify.
As there is no way for senior leadership to be cognizant of all issues and complexities across the company, individuals play a leading role where anything can be questioned and challenged by anybody at any level, without the fear and consequences of challenging authority. This requires a strong culture of questioning to trickle right through the organization. Leaders must reward and encourage questioning while everyone is fully empowered to question and identify opportunities for simplification across all areas of the organization.
Culture of Curiosity
As children, curiosity was one of our primary learning tools. When we accidentally discovered the color orange by mixing by mixing red and yellow, curiosity sent us on an exciting adventure to find all the possible color combination. Years later we get to the workplace and the only encouragement we get is to specialize and be really good in one thing. A culture of curiosity where employees and leaders are given the runway to learn, unlearn and change their perspective becomes essential.
In a recent HBR article, Business Psychologist Dr. Tomas Chamorro-Premuzic outlined the importance of a Curiosity Quotient (CQ) when it comes to managing complexity in two major ways. First, individuals with higher CQ are generally more tolerant of ambiguity. This means they don’t necessarily see things in a very structured (in a box) way. Second, CQ leads to higher levels of intellectual investment and knowledge acquisition over time, Knowledge and expertise, much like experience, translate complex situations into familiar ones. In culturally progressive companies such as Zappos, employees earn their raises and promotions through acquiring new skills. Once a new skill is learned and applied, employees get recognized and rewarded. This not only incents curiosity, but encourages and rewards it as new skills benefit overall company and consequently Zappos’ customers.
As individuals, most of us are in roles where we see things from our own perspective and through our own (personal and professional) biases. While biases are part of human nature, they do tend to cause us to often ignore the views of a customer or fellow employees (have you ever gotten the “Let me tell you about our product” pitch for 30 minutes?). Developing a strong sense of empathy is essential to understanding the perspective of others who are experiencing your products or services, and generates insights that can be used for designing better and simpler experiences. Travis Kalanik, CEO of Uber regularly drives an Uber car. When he drives, he gets the opportunity to chat with customers and Uber drivers to understand their experiences and reactions first-hand and as a key input to continue to enhance the service.
Culture of Iteration
While some believe that in order to simplify we have to remove complexity, simplification often requires radical thinking and an adopting the occasional “blank canvas” approach in order to truly understand, rethink and re-imagine a simpl(er) way of doing things. To be successful, we must accept that we will start things that might fail. We may over-simplify things, or perhaps find we didn’t hit the mark with our customers on the first release.
A culture of iteration requires leadership to support and tolerate experiments that may end up as failures. While companies are beginning to accept the value of failure in the abstract, it’s an entirely different matter at the personal level. Failure and mistakes still destroy careers and individuals are quite often used as scapegoats. In a culture of iteration, leaders are not afraid to stand apart from the crowd, to be different, to step out of the comfort zone and risk all for what he/she believes in. They develop their employees using the very same principals – by challenging people to take on new challenges, by allowing people to fail and make mistakes, but becoming stronger for it.
Common & Clear Purpose
Finally, and arguably the most important element to simplification is aligning the company to a clear and common purpose. No matter how much you may dictate from the top, the organization needs to buy into the simplification mission at every level, else for everything you simplify, more complexity will continue to be generated elsewhere.
We want people to simplify the business because they want to; and they believe this is the right thing to do, not because it’s in their KPIs or pay package. That ambition needs to come from frustration. Starting with a top-down and bottoms-up movement to create awareness and over dissatisfaction with the status quo that complexity brings. Let’s face it, nobody likes running on a hamster wheel for 10 hours a day. Appealing to the desire of a simple and more rewarding workplace, both leaders and individuals can create a compelling vision of a “simpler life”, creating that sense of dissatisfaction along with ambition and passion across the organization. Everyone should feel that they are doing this for both themselves and the greater good of the organization. It goes far beyond “checking the box” and into the realm of a passionate movement.
Bottom line is that simplification goes far beyond removing management layers or establishing committees to identify and action on redundant functions and processes. It requires working against the very same structures and cultures that have been established in order to make us successful in the first place. It requires a new lens, new perspective and leadership capabilities that extend beyond one’s comfort zone.
Simplification is too important to be left to chance. No matter the industry, in a fast-pace and ever-changing society where the needs of the customer are constantly shifting, a company will struggle to keep up with competitors without the agility and advantages that simplicity brings. Simplification begins with the right leadership mindset that trickles down and empowers a passionate movement within employees. When leaders establish and foster the right organizational culture that supports simplification as a top priority, they open the door to a world of opportunities.