Management Tools
What Is Complexity Reduction?
Complexity Reduction is a process to help companies simplify their strategy, organization, products, processes, and technology. Reducing complexity in any of these areas creates opportunities for simplification in others. Unwieldy complexity often comes from business expansions or bureaucracies that unnecessarily complicate a company’s operating model. This may lead to sluggish growth, higher costs, and poorer returns. Complexity Reduction finds inflection points where products or services meet customer needs at the lowest costs. For example, companies that streamline product lines may be able to simplify organizational structures and decision making. This results in better service to their core customers, with reduced demands on business processes and information systems.
How Is Complexity Reduction Implemented?
Complexity Reduction requires managers to:
- Understand the sources of complexity and examine trade-offs between operations and variety or customization for customers
- Identify opportunities to simplify products, organizational structures, business processes, and information systems to save costs while strengthening core capabilities and increasing customer focus
- Take steps to stem the return of complexity by reexamining the hurdle rates for new products and other expansion activities
- Simplify decision making by clarifying roles and processes
Complexity Reduction helps reveal hidden costs and allows companies to determine which products are making money, what customers really value, and which organizational or process bottlenecks are getting in the way of effective actions, setting the stage for greater growth and increased profits.
Related Topics
What Are the Common Uses for Complexity Reduction?
Companies typically use Complexity Reduction to:
- Identify and strengthen core capabilities
- Build the business around customer needs
- Create a disciplined approach for releasing new products or services and trimming those that customers no longer value
- Design an organizational structure to support critical decisions
- Maximize process efficiency
- Align technology with business objectives
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First published in enero 2023