Complexity Management

Although this title can seem a little absurd, this article aims at understanding better the principles of complexity management. In effect, complexity is a large concept, which usually seems unmanageable for most managers. Let us start with the pillars of complexity management for businesses.

Strategy Alignment

Most projects fail because this condition is not respected. In many organisations, departments and their people often act and make decisions for themselves. They do not pay attention to the business strategy. Each one wants the best results for its department. However, managers should understand that their decisions also impact on the rest of the business. For this reason, any project must involve a team project formed by people from all the departments and functions in the company. This team project should think and act according to the common interest of the business. Thus, all the strategies have to be aligned with the business strategy. In effect, interactions and complexity will be easier to manage if all the strategies are pointed towards the same goal.

Transparency

Nowadays, we think that all the information is accessible to anyone but this is not entirely true. Although there is a lot of information in organisations, everyone tries to keep it for himself. Information is synonym of power and nobody wants to share it, for fear of losing power of decision in front of others. However, any decision should be revealed to the entire organisations, so all the departments are aware of what is actually happening. This will enable them to make decisions, which will suit to the business strategy. Thus, the conclusion is that information must be available easily to avoid useless interactions, which will cut complexity.

Sustainability

When starting new projects, organisations must beforehand make sure that it is not a precipitated decision and that it is suitable for this kind of organisation. In effect, all systems are not good and effective for all businesses. Organisations have different needs and requirements, which should be satisfied by different and suitable decisions and implementations. Preparation is a key factor for sustainability of any project implementation. Sustainability enables to have less complex systems. In effect, sustainability involves long-term relationships, which imply less multiplication of interactions and then less complex systems. Complexity can be easier to manage through smaller units. In effect, large systems imply a tremendous amount of interactions whereas smaller units are more manageable. Using modular systems is the key to implement projects successfully and outstrip complexity. Although interactions still exist, they are easier to manage through modular systems because any other can replace them at any time. Complexity is not a threat anymore if you control it with modularisation. The concept of modularisation is developed into a chapter of Vivek Sood’s book, The 5-STAR Business Network (http://bit.ly/5-STARBN), and will be even more deeply analysed in his next book, Outsource, Outsmart, Outprofit. Therefore, these four elements are the most important pillars in complexity management. If you understand how to use these pillars, complexity management will be made much easier for you business. Although complexity can be helpful, it is not worth it to let it control your business. Complexity will certainly beat you. However, you can learn how to be able to manage it and tame its interactions, by using these few elements above. You can find a more detailed approach in the book The 5-STAR Business Network, by Vivek Sood.

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  • Watson SC Executive says:

    I believe that some complexity is necessary and even advantageous. For example, customers like to have some choices–and different segments have different needs; country or regional business units can be closer to the ground than headquarters and are more likely to know what customers want in their areas. However, if not carefully managed, the new interfaces and modes of interaction can lead to bureaucracy, conflict and wasted energy. The key is not to eliminate choices and autonomy, but to consciously manage the benefits and costs of optimizing customer offerings, decision and operational processes, business and organizational structure, and the IT systems that support it all.

    Complexity is a natural consequence of a company’s success. As companies grow, they enter new markets, expand their product lines and set out to conquer new customer segments. And on the way, they build up their organizational, process and IT infrastructure to support that growth. Taken individually, each decision makes rational sense, but in aggregate, they create exponential growth of the “nodes”–points where business units, functions, geographies, and layers of management have to interact to make and execute critical decisions. This often becomes the root cause of sluggish growth, high costs, and poor returns.

  • Jerlinken says:

    What I have come up over in my recent research is Complexity management is a business methodology that deals with the analysis and optimization of complexity in enterprises. Effects of complexity pertain to all business processes along the value chain and hence complexity management requires a holistic approach.

    Complexity is a natural consequence of a company’s success. As companies grow, they enter new markets, expand their product lines and set out to conquer new customer segments. And on the way, they build up their organizational, process and IT infrastructure to support that growth. Taken individually, each decision makes rational sense, but in aggregate, they create exponential growth of the “nodes”–points where business units, functions, geographies, and layers of management have to interact to make and execute critical decisions. This often becomes the root cause of sluggish growth, high costs, and poor returns.

  • Pascal says:

    As from my point of view, complexity management is a business methodology that deals with the analysis and optimization of complexity in enterprises as u said complexity is a large concept, which usually seems unmanageable for most managers.

  • Stuart says:

    Businesses of all sizes are complex entities. From managing finances and people to ensuring strict legal compliance, business managers and owners have to navigate their way through an endless stream of policies and procedures daily. While all of this can seem overwhelming, particularly for the small business owner, there are a number of interrelated theories on management that help to manage complexity. Business complexity is actually the information that would be required to completely document a firm including its organizational structure, processes, systems, infrastructure, tools, facilities, products, services, interfaces and procedures. Complexity remains a here-and-now management and leadership challenge. The application of efficient complexity management strategies could bring rigor to business and organisational dynamics with a greater surety in decision making.

  • Richard says:

    There are no simple answers to managing increasing complexity and the pace of change in the modern business environment, so you have to find sophisticated answers. Managing complexity in the business environment requires a sound organizational strategy. Strategic management is the process of analyzing a business’ major objectives and assessing its use of resources and stakeholders. If your company sells ice cream, for instance, your major objective may be to sell to customers on the corner of a busy downtown street.
    Having laid out this objective, you can go about evaluating how your resources and staff are helping or hindering progress toward this goal. If you consistently run out of ice cream cones; you have a resource problem. If customers don’t like the service they receive, you may have a staffing problem. Whatever disadvantages you notice through your assessment can help you develop a strategy to work these things out. Identification is the first step toward managing complexity.

  • Joe says:

    As a result of continual pressure for growth, most companies have both expanded their product lines significantly and indulged in what appears to be ever promotional activity in an effort to stimulate customer interest and gain share. One of the consequences of all this activity has been an enormous increase in the complexity of their businesses which tends to increase the fixed costs of conducting their business. This complexity manifests itself in many forms affecting everything from the day-to-day operations of the business to senior management’s strategic plans. Economies of scale, scope, and skills appear to be wiped out by economies of complexity.

  • Emery says:

    In order for a company to experience organizational strategic alignment, its management, processes, and goals must be in alignment. To create a culture of support, a company must clearly define the competence of its resources by evaluating if its equipment, staff, and processes can handle new changes. If employees do not possess the competence to handle a new strategy, a company should provide training to enhance the skills of its managers and employees. Without adequate training and support, the relationships between employees and managers will suffer and the organization will lack flexibility. In an effort to create a supportive culture, senior management should be involved in organizational strategic alignment from the start and secure the proper resources to help ensure the success of the employees and the company. Employees also must commit to supporting a company’s strategic alignment, and management can help ensure this support by clearly defining the company’s goals and providing an incentive to help the staff accept new strategies.

  • Arielle says:

    It’s no wonder that complexity management is big business. We become anxious and stressed when complexity levels rise above our ability to handle it. Under the burdens of stress and anxiety, people are not motivated, productive, or creative. Many situations in work and business have risen above our cognitive abilities and our chances of predicting industries, societies and working conditions are slimmer than ever. Take finance and politics, perhaps the most analyzed fields of society, surrounded by huge industries of analysts, experts, scientists, and media. In business, one industry after another is disrupted or otherwise seriously threatened by entrants coming out of the blue. Digitalizing, robots, and the internet are forever changing our ways of working and living. How about your own company and your own job? Very few would say that it’s becoming easier to comprehend the how’s and why’s of modern working life.

  • Tessa says:

    Good article Vivek. The human mind and our ways of perceiving and thinking are built for complexity reduction. Categorizing, selective perception and heuristics in decision making are examples of this and come so naturally that for the most part, we don’t even notice. We are unable to control what we do not understand or cannot predict. So we simplify to feel in control. Most leadership tools are basically built for the purpose of being in control, to establish control or appear to be in control. That’s why higher levels of complexity create anxiety and stress among most people including leaders. We seem to need the illusion of control. So we make plans that don’t work, grand strategies that become obsolete long before they are realized and catchy visions which often seems like rituals, me too actions or window dressing.

  • Ivy says:

    Such an interesting article Vivek. I believe trust, communication, transparency, quality of planning and decision-making techniques all affect a company’s organizational strategic alignment. In order to form a company to experience successful alignment, it must strive to understand its stakeholders, particularly its customers, through marketing research. A company should use a critical path analysis, an algorithm that helps develop project management timelines, in order to predict the amount of time needed to implement change.
    Poor follow-through can negatively affect organizational strategic alignment, so a business must continue to follow plans for change after taking the initial steps, track progress and taking into account the consequences of not following through with plans for change. Additional considerations for companies to take into account regarding organizational strategic alignment include the reactions from competitors and the possibility of government intervention.

  • Lazerath says:

    The challenge with managing complexity, of course, is that some complexity is necessary and advantageous, even in a downturn. For example, country or regional business units are closer to the ground than headquarters and are more likely to know what customers want. It takes a complex organization to provide enough local autonomy so products or services can be tailored to those customers while still taking advantage of global scale. But that kind of complexity can be vital to sustaining sales through a recession. A similar challenge arises when companies struggle to balance complexity and innovation. Adding new products, services, features, and options create a complexity of all sorts. But companies become leaders by offering customers new choices, and in a downturn, innovation may be a company’s salvation.

  • Myrddyn says:

    Many companies express serious concerns about their capability to successfully manage complexity and have striven to simplify their business, retrenching to a stable portfolio of core products and processes. Others have attempted to manage complexity through systems, structures, procedures, complex organization, and group decision making. Only a few have come to grips with the strategic challenge, they have learned to manage a complex business in simple ways improving both share of market, innovativeness, and profitability in the process.
    Complexity is a by-product of managers’ daily decisions, decisions which are influenced by many factors rooted in a company’s internal and external environment. For instance, companies have responded to competitive problems and opportunities by proliferating their product lines, promoting more frequently and aggressively, moving marketing euros and customizing their communication to meet local needs. Customers have been hit by an avalanche of new products as new product introductions have been growing at a rapid percentage per year.
    For the manufacturer, this continuous new product extension has meant increasingly unwieldy product ranges. All of these moves increase the complexity of running a business, and, unless special care is taken, may eventually ratchet up costs.

  • Amy says:

    In today’s world employees and customer’s alike want to work and support a company with good values so it’s critical that you be as transparent about your business as possible. So what does being transparent mean? Do you have to show the team your bank statements? Do you have to show them how much you pay yourself? Those questions depend on you but the more they know the more they feel part of what you are doing. The more they know the more they trust you and will buy into your vision. I recently started working with a client who was struggling to pay the bills. When we sat down and told the staff the situation and why the business was struggling and explained what we had to do to survive the staff was incredibility supportive. People started turning off the lights when they left an empty room. They stopped asking about getting paid more and there was a new urgency to help the founder survive. Being transparent changed the culture in the company and I bet will help it really grow. I know that will help in the way the customers are treated and I have already seen the founders stress levels decrease because now he has helped.

  • Wang says:

    Complexity management is needed when you have many and diverse elements that are quite autonomous, yet interrelated in nonlinear patterns, and when emergence produces outcomes intended by nobody. Complexity may occur in business external environments, in the internal organization or both. The ability to comprehend, interpret and manage complexity has always been an important source of power according to theories and experience. It seems like that road to influence will broaden in the future. Moreover, it seems like a very good investment. The global businesses have identified that the world’s largest companies lose their substantial profits due to poor handling of complexity.

  • Kent says:

    While transparency in all areas of business is an asset, there are some forms of complexity that are good for business. Certain policies and procedures may be beneficial to your company’s overall strategy. Having two people sign off on an invoice request or holiday request serves as a useful double-check, and having an internal or external auditor monitor the company’s financial books helps eliminate waste and fraud. While these policies create extra complexity within the organization, they help manage the company’s strategic direction. It is important for managers and business owners to understand which complexities are essential and which can be eliminated.

  • Kenneth says:

    Wonderful article on complexity management Vivek. Managing complexity is such a challenging issue that many organizations fail to deal with it. I think a useful way of analyzing the level of complexity in your, and separating complexity that’s beneficial from the complexity that hurts the business, is to begin from a base of zero. Imagine, for example, that your company produced just one product or service with no options or varieties. A manufacturer with only one product would still need a supply chain, a factory, a distribution network, and a sales-and-marketing function. But it could greatly simplify its IT systems, its distribution and sales efforts, and its forecasting.

  • Nicole says:

    Organizations around the world are challenged to adapt to the changing business environment at a breakneck pace. Consequently, having team members who understand and are in alignment with the business’ principal strategy are increasingly more important. In order to stay competitive, organizations must devise viable, creative strategies for business success and growth. And in order for a corporate strategy to do its job, an organization must maintain strategic alignment throughout every level of the business. Lacking strategic alignment, well-meaning managers may spend countless hours pursuing initiatives that, while they may be good ideas, aren’t the right things to focus on at the time. Even worse, if the strategy of the organization is unclear to employees at the operational level, they may lose faith in the vision, mission, and value proposition of the organization. This loss of connection can squelch their morale and willingness to offer their best to the company, which not only hurts the company culture, it hurts the bottom line. By ensuring that there is strategic alignment in your organization, you can be certain that limited resources won’t go to waste.

  • Grace says:

    Attention-grabbing article indeed. Transparency is important. Think about how you want people to treat others and make that an essential part of your business. You most likely want everyone to act with integrity and honor. Be consistent with those values for everything you do, from discipline to making new products as well as hiring new people. While selling is important, it should not be the goal. Make spreading your core values throughout your team and in the world your goal. There should not be any secrets about the business between yourself and your employees. Share everything you can with them and your investors so they are on the same page as you and trust you.

  • Melody says:

    Aligning strategy throughout the business is very crucial. Strategy is often thought of as something that only top-tier executives can influence, and while it may be true that “top-down” strategy is most common, we maintain that individuals throughout the organization must both understand the organization’s strategy and create an ancillary strategy for themselves, a supplemental strategy that directly impacts their respective areas of responsibility and strengthens the core of the business. When carefully crafted, these supporting strategies are designed expressly to create added value within different divisions of the business while simultaneously upholding and supporting the corporate strategy driving the company forward.

  • Bertrile says:

    The organisational world is more complex today than it ever has been. And there’s every reason to believe that this complexity will continue to increase, year on year. Systems are interconnected as never before and the information that comes along with that proliferates. In complex systems, unforeseen factors continually give rise to situations where traditional decision-making and leadership are difficult to apply. With technology and communication creating so much information, it is increasingly difficult to manage time effectively. Mindfulness can help leaders find creative solutions to problems by enabling them to focus more easily on the information that matters. But in a complex system, there are so many different solutions to the problems faced by managers that it can be difficult to know where to start. Not only that, but management styles vary so much these days and not all solutions suit everyone. With so many choices, it’s hard to be clear about the right course of action.

  • Maggie says:

    There are significant advantages to productivity, trust, culture, and morale when you embrace transparency. Being open and transparent allows you to manage the public perception of your company. If a crisis arises, you’ll have established media connections that you can call on to disseminate information. This positions you to release information in a time frame and fashion that are most advantageous to your company, allowing you to manage even the most challenging situations. Some companies become transparent only after they’ve been involved in a scandal and have had to publicly defend themselves or otherwise explain their actions and behaviors. A transparent approach to business shows the public that you have nothing to hide. This is especially effective when your transparent business operations include open and straightforward communication via your publicity department. Being up-front rather than hedging or spinning corporate information, even if that information is unfavorable, demonstrates integrity.

  • Linda says:

    Complexity is a by-product of managers’ daily decisions – decisions which are influenced by many factors rooted in a company’s internal and external environment. For instance, companies have responded to competitive problems and opportunities by adding their product lines, promoting more frequently and aggressively, moving marketing euros and customizing their communication to meet local needs. Customers have been hit by an avalanche of new products as new product introductions have been growing at 10 to 20 percent per year. For the manufacturer, this continuous new product extension has meant increasingly unwieldy product ranges. All of these moves increase the complexity of running a business, and, unless special care is taken, may eventually ratchet up costs.

  • Christine says:

    Does this question intrude upon your thoughts every now and then? Relax, you’re not alone. In times of increasing complexity, confusion is the new normal and complexity management enters center stage. There are very few one-way streets in society and business these days. Except for the fact that rising complexity is here to stay as a new fact of our professional and societal life. Managing a business today is fundamentally different than it was just 30 years ago. The most profound difference, we have come to believe, is the level of complexity people have to cope with. Complex organizations are far more difficult to manage. It’s harder to predict what will happen because complex systems interact in unexpected ways. It’s harder to make sense of things because the degree of complexity often exceeds our cognitive limits. And it’s harder to place bets, since the past behavior of a complex system may not predict its future behavior.

  • Kim says:

    In order to get the ball rolling on organizational strategic alignment, a company must create a performance and cultural management focus that leaders identify and agree upon during a time of strategic change. This focus is like a North Star for managers to follow that enables them to provide the appropriate employee motivations, cognitive support, and resources. In order to align management, however, company leaders must know how to manage change by understanding reasons for internal resistance to organizational strategic alignment and make the relationship between a company’s vision and its technology, organization, and processes clear. Raising self-awareness and allowing teams and individuals to have more autonomy can help drive organizational strategic alignment and have employees centered on the company’s goals. In order to promote the team and individual efforts, a company must offer transparency and provide sufficient information for employees to complete tasks, as well as include other company stakeholders. By promoting efforts to individuals and teams, a company helps to build trust, which can increase loyalty to its organizational strategic alignment goals.

  • Hathway says:

    Across all industries, transparency has never been more important to a successful business model, regardless of company size. When it comes to employee engagement, this particular business practice has been proven to be essential, at a global scale. Trust in management and in the future of the company is a key component of employee engagement. Employees want to know what drives the company they are working for, what its long term goals are and how they will be involved in achieving these objectives. Communication and transparency across all levels of management are what foster this trust and determine the degree of discretionary effort that comes with a high level of engagement.

  • Jimmy says:

    Strategic alignment is a fundamental business concept that determines the competitiveness of an organisation. The concept explains how organisations can better achieve strategic alignment to increase growth and profitability – even in the toughest markets and economic climates. Strategic alignment is the strength of the links between an organisation’s overall goals and the goals of each of the units that contribute to the success of those overall goals. The concept is closely related to strategic fit, which exists when the network of internal performance drivers is consistent and aligned with the firm’s desired customer and financial results, outcomes, and consequences.

  • Campbell says:

    Perhaps the most important aspect of managing complexity for a business’ long-term strategy is a focus on sustainability. Sustainability is concerned with managing the company’s triple bottom line. This is the financial, social and environmental aspects of the business. It is about the three Ps: your profits, your people and the planet. Sustainability is about making sure your business’ complex systems and processes not only yield long-term growth but also that they help, not hinder, your stakeholders and that they don’t harm the earth. Assessment and control are at the core of sustainability. Constantly monitoring your organization’s impact on the three Ps helps manage the complexity in the business and helps you to focus on the company’s long-term strategy.

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