Slimming seems to be in vogue in the corporate world. There is an increasing number of large businesses that have grown to become global behemoths that are actively simplifying themselves, divesting divisions, and streamlining operations. They want to slim down and focus on their core business.
Read A Cure for Complexity: Slimming Down to Compete Against the Focused and Fleet-Footed, in our consulting journal Perspectives,to see how your organization can adopt each of the four elements of business simplification.
Rapid advances in digital technology have created a micro-segmented, multichannel environment. Globalization, mobility and outsourcing have all added vast layers of complexity to our world. Businesses and individuals struggle to keep their heads above water as they find themselves deluged by large quantities of data from an ever-growing array of smart devices that monitor our movements day and night.
While complexity itself is a drain on resources, the reality is that the search for simplicity, and the slimming down that accompanies it, is being driven by the arrival of nimble, asset-light competitors. Airbnbs disruption of the hospitality sector, Spotifys attack on music sales, mobile banking businesses and online retail are all forcing established businesses to take a long hard look at their operating models.
Irrespective of the scale of business, its clear that when conventional business models are compared with those of disruptors, success favors the simple, not the complex. As a result, organizations are seeking ways in which they can reduce their vulnerability and become more agile and more responsive.For start-ups and new market entrants the key is to retain the simplicity that is central to their value proposition. For well-established businesses the challenge is to identify where and how they can de-clutter themselves, and shed some excess kilos.
Our work in the rapidly evolving field of business simplification tells us that the companies with the greatest interest in simplifying display either of these two characteristics:
- They are vulnerable to competitors who dont need much capital to enter the market. Ubers model of not owning the vehicles from which it derives revenue makes it a clear example of this type of asset-light competitor.
- They have major sunk investments in business models that require modification or transformation. Telecom companies, for example, with massive fixed line infrastructure are looking for ways to overhaul their business processes to suit the needs of a mobile-led world of communications. Likewise, banks with extensive branch networks need to deliver an online service.
Business simplification as a route to survival can take many forms. Youll find at its heart a process of reimagining the product portfolio and restructuring the operating model needed to deliver a streamlined suite of products.While the environment in which we do business will not get any less complicated, there is much that can be done to gain a competitive advantage by simplifying.
TCS’SAP S/4HANA video on digital transformation is just one example of how businesses today achieve simplification by reducing silos. I welcome your comments and experiences here on reducing business complexity.