Products, customers, competitors, subsidiaries, countries, and partners, all increasing: are they making your business too complex?
Every company wants to improve its results, and to do so, they can use very different ways. The most common ways they use to achieve this goal are whether improvement of the quality or the reduction of their costs. How do they do? What methods do they use? They want to sell more products, in more many locations, to target more customers and achieve better results. On the other hand, they also want to cut their costs and that is the reason why they implement subsidiaries in many different locations and countries because they think it is always a good solution. However, sometimes (if it is not often), they happen to be wrong about their evaluation and analysis about the process they chose to carry out. However, this article is not about preparation and wrong analysis of opportunities, but it aims at proving that complexity is the only result they get through these decisions. First of all, what is complexity? Complexus (Latin) means “twisted together”, which is quite a good definition of this concept. According to Wikipedia, “Definitions of complexity often depend on the concept of a “system” – a set of parts or elements that have relationships among them differentiated from relationships with other elements outside the relational regime. Many definitions tend to postulate or assume that complexity expresses a condition of many elements in a system and many forms of relationships among the elements.” Therefore, complexity appears through tremendous numbers of interactions between the numerous parts of a system. In fact, complexity keeps increasing while have more and more parts, which makes sense obviously. A very small business does not imply complexity because interactions and relationships are limited to a few numbers of parties and people. However, there might not be enough complexity in those businesses because it also means that results will not be as good as for bigger businesses. Obviously, we are talking about profit here. Consequently, it is very logical that companies want to grow, in order to improve their results and beat their competitors in the market. However, at some point, companies that cannot stop increasing anymore can end very badly, and this is because of over complexity. Beyond a certain point, expansion involves complications and the turnover starts to decrease, as well as profitability. Therefore, every CEO should have a look at its entire business, and the parties and relationships that consist it. In effect, your business might be becoming over complex because of useless interactions that make the business go down instead of helping it improve. All the content of this article can be summarised by the complexity curve below: To conclude, we have no choice but to accept that the more complex your business become, the less money you will earn. Thus, CEOs must pay more attention to what is happening when expanding a business. In effect, management has to evolve while your business is expanding and that is the reason why it is important to take into account all the consequences that can appear every time you make a decision. Complexity can be unstoppable and make your business go bankrupt if you do not act before it is too late. If you want to understand more about growing businesses, you can read Vivek Sood’s book, The 5-STAR Business Network (http://bit.ly/5-STARBN).