Consider this image: on the left is the Apple remote. On the right is a Blu Ray player remote. Essentially, they both fulfill the same function: to play a movie and to navigate back and forth through the movie. Sure, a Blu Ray machine and iTunes aren’t the same thing as mediums that contain movies; and you can do things with one that you can’t do with the other; but, from a user standpoint, you want to watch a movie and decide where to begin or where to go next – period.
Yet, look at the simplicity of an Apple remote in contrast with all the buttons of the Blu Ray remote. Isn’t it remarkable? But do you realize that the vast majority of remotes associated with TV’s and DVD or BD players are like the Sony one in the picture?… Why hasn’t everyone thought of a simple way to bring content to users?
This, of course, is just one example. You can find this evident tendency for complexity everywhere you look, both in society at large and in business life.
Complexity – just like chaos – is natural because it is easy; Simplicity – as order – is not natural and thus it is hard and requires both talent and discipline. I am not talking about just doing something simple. Anyone can draw a simple straight line instead of scratching a ‘spaghetti’ of intersecting lines. What I’m referring to is the ability to resolve a complex problem or disentangling a complex reality, with an elegant solution that is characterized by its beautiful simplicity.
In business life, the difference between complicated processes and simple ones is the difference between low productivity and high productivity; between sluggishness and speed; between slow innovation and rapid, frequent new products.
Complexity in how we work
Let’s think about complexity in the context of the work environment of a Business Enterprise. Here, we typically find two forms whereby human beings try to create a controlled environment where people work and the Enterprise delivers its promise to the market: the organization and business processes. Underlying these two ‘systems’ we can also find IT systems but the latter are entirely conditioned by the former two.
Complexity in day-to-day dynamics of an Enterprise appear in many forms: things take too long to get done; decisions that are slow; projects that go on forever; problems that take too long to get solved; meetings that are numerous and often involve many people; performance KPI’s (e.g., forecast accuracy or service levels or excess inventory) that are poor and take a long time to improve; etc.
When businesses grow, organizations become more complex and so do processes. This can be seen quite clearly in centralized functions – global IT, global Supply Chain, global Finance, etc. If you want to get something done and it has to go through global ‘anything’, you roll up your eyes because you know it’s going to take a while.
I’ve been dealing with complexity in systems – organizations, business processes, IT systems – for over 30 years and I’ve had to simplify complex constructs at a very large scale, including some of the most complex systems in the world. In the course of this journey, I found a number of common elements to both complexity in the Enterprise and to solutions that create simplicity. Following, I will present a summary of my experience, hoping this may help some who wish to confront this challenge of complexity in large structures.
Common sources of Complexity
Let’s not talk about the form that complexity takes – anyone reading this article is familiar with what complexity looks like. Let’s instead look at some common causes of complexity in Enterprises.
Redundancy in Roles
Organizations evolve gradually over time; they don’t just become; they go from one stage to the next and as they do, there starts to emerge redundancy between different roles. For instance: a Forecaster and a Product Manager; a Planner for Internal Products and a Planner for External Products; Accounts Payable in Finance versus Payroll in HR; Analytics of Product Demand versus Analytics of Customer Demand; Inventory Management by someone in Customer Service, versus someone in Supply Chain versus someone in Sales; a global function and a local function. And so on.
Redundancy is the direct result of two things: the Functional Org Structure; and growth. In a Functional Structure, Departments are managed independently of each other and as a result decisions are made about detailed roles and tasks that are redundant across departments. I’ve often found two different groups performing redundant tasks without ever realizing it. You see it in initiatives: one Department starts a project to resolve a problem; another Department starts a different project that solves a similar problem.
Redundancy isn’t just cost ineffective. More importantly, it causes lack of clarity in how problems are solved or how work gets done and that in turn makes processes complex.
Excessive Fragmentation of Roles
Here’s a universal and inevitable truth: the more Roles there are, the more steps there will be in processes using those Roles. You can’t escape it. Processes have to hop from Role to Role until everything gets done. I do this, then he does that, after that the other one does something else, and so on.
Example: a Sales Rep in the field wants to make a deal with a Customer and needs approval for the discount he wants to give the Customer. The deal goes to Marketing; then it goes to Finance; sometimes it has to go to a higher authority; then it comes back. Why doesn’t Marketing have the information that Finance has; or why doesn’t the Sales Rep just go to Finance?
Another example: a competitor goes out of stock; one of his Customers contacts a Sales Rep to see if your business can replace the competitor; the Sales Rep contacts a Product Manager; the Product Manager talks to a Forecaster or Demand Planner; the latter then goes to Supply Chain; Supply Chain goes to the source Plant to see if they can handle the volume; a Planner at the Plant looks at it; then the Planner talks to Purchasing who then talks to a Supplier of a key raw material; and then eventually everything comes back to the Rep. See what I mean?
This latter example illustrates another aspect of complexity: sequential processing. Functional structures are notorious for territorial behaviour and delineation of authority. As a result, sequential processing of business events is a natural form in such structures: I am the one who tells you this and that. You can’t contact them directly. You speak to me, I look at it and then I pass the information to them.
Sequential Processing is partly related to an incorrect notion: the notion that ownership of task implies ownership of information. As a result, information moves along the responsibility thread from Role to Role instead of being available to everyone at the same time. Making life sequential is one of the biggest mistakes human beings have made in the design of organizations. Sequentiality makes things extremely complex because life is not sequential and the correct sequence of actions is impossible to prescribe before hand for every possible event – or even most events.
Lack of Architecture
In my mind, the word Architecture means bringing components together into a structure where the relationships between components is clear and coherent. Architecture is what holds all these components together and makes them function as a whole.
Architectures are common in ‘engineered’ structures. You find them in software, hardware, buildings, houses, machinery, gardens and other physical constructs. But you rarely find them in processes.
When I visit organizations, the way I find processes is in ‘stacks’ that grow and grow over time. I find projects the same way – no architecture, just a long list of projects. Both processes and projects are often classified – of course, human beings are obsessed with classification. But there is a big difference between classifying things and providing an architecture for things.
When projects don’t exist because there is a business architecture that dictates that they must exist, they proliferate – you have more projects, you have redundancy between projects, there is great difficulty in prioritizing them and as a whole those projects don’t add up to as many benefits as we wish they would. The result is an enormous waste of energy.
The same goes with processes. When there isn’t an Architecture that holds them together and establishes relationships between them and provides coherence, processes proliferate. Once you have too many, the proliferation grows out of control because each time you find a situation for which there is no process, you can’t figure out which existing processes will be appropriate for the new situation and so people create new ones.
Lack of Architecture leads to specialized processes, i.e., processes that address a very narrow problem or situation. If processes are narrowly focused, they are not reusable across many situations which then leads to more processes.
Lack of Architecture is, to me, the number one cause of complexity in organizations.
Not enough fragmentation
I know, I seem to be contradicting myself. Just as people don’t realize that two things are the same, they often don’t split issues that are really different. Take the example of an organization with multiple product lines distributed to multiple markets. Although these product lines are distinct, they are all the same type of product. Thus, the organization starts with one supply chain; then it extends the same supply chain to new derivatives of the same type of product; then it extends it some more; and after a few years, you have one supply chain serving multiple lines of business.
In this case, not fragmenting is causing complexity because these lines of business are quite different – the behaviour of demand is very different from one to the other and so it is very hard to support distinctly different demand flows with one common supply flow. The result is that the most voluminous lines of business do well because the supply chain ends up favouring them; while smaller lines of business get compromised. And yet, it is the latter that can fuel growth whereas the former are more mature and have less room for growth.
Basic Approach to Enterprise Simplification
Believe it or not, it is possible to create simple Enterprises – i.e., simple organizations and simple processes – no matter how large they are. I once consulted to a very large Bank who had 300 systems supporting 400 Banking products across several domains – retail banking, investments and insurance. I was able to architect 6 constructs that could emulate the properties of all 400 products – and therefore, was able to emulate the properties of many new products.
With time, I was able to develop a few basic principles and techniques that help me create simple forms for complex problems. Following is a summary of these approaches.
Architecture, Architecture, Architecture
It’s extremely important to Architect business processes – by that I mean, specifically, that all business processes belong to a coherent Architecture.
Of course, not all Architectures are simple. So, what makes Architectures simple? What makes them remain simple even as they grow in scope and diversity of challenges?
An Architecture is simple or complex depending on the properties of its components. In this case, components would be business processes. But you also have the Organizational Architecture where the components are Roles.
Roles and Processes have to have specific properties in order to arrive at a Simple Architecture, as follows:
- Elementary – a process or role can only do one thing or have one mission. You have to be able to define role or process with a single sentence that establishes a single purpose – a single, coherent focus.
- Unique – whatever the elementary scope of a role or process, no other role or process can perform the same or a similar role.
- Clear – the definition of the scope of a role or process has to be so easy to understand that everybody interprets it the same way.
Yes, it is very hard but it is always possible. If you take your current organization and your current processes and you go through an exercise to arrive at roles and processes with these 3 properties, what you will feel is as if the business is going through a massive diet and everything gets compressed into a very simple and yet capable form.
Move from Hierarchy to Network
In the middle ages, paintings were always two-dimensional. Then, in the Renaissance, someone invented what became a tremendous breakthrough – perspective! From then on, paintings became three-dimensional and art became richer and more interesting.
A similar breakthrough has already arrived in organizational design. Since forever, Enterprises have been structured in Hierarchies – usually Functional in nature. Large, Global enterprises have Hierarchies in multiple planes, with matrices that crisscross matrices. Things become very complicated and yet the Hierarchy persists, for all sorts of good and bad reasons.
But for the past decade or so, a new approach to how people are organized has been emerging. It appeared in a social setting but it’s gradually permeating business. This breakthrough notion is the social network.
What is surprising is that it has taken so long and that so many are still resisting this change. People are made to network. That is what we are – we network! We are social beings and we network in multiple, complex relationships. And when we network in order to do work, we are actually amazingly efficient.
When we artificially organize work in hierarchies of boxes with very specific job descriptions, we feel in control and yet we are not. We feel that things are better structured because what people are supposed to do is so clear. We go for a job interview and what they want us to do is so clear. Everything seems so neat.
And yet, everything is not neat because on a daily basis people are constantly dealing with exceptions to the ‘neat’ model and are constantly having to improvise and cross those lines; and since the structure is so artificially constraining, we keep bumping elbows against each other as we scramble to handle all the situations the neat model didn’t anticipate – because it can’t. We are forever gathering in large, amorphous groups (i.e., meetings) to discuss unexpected issues and figure out how we’re going to solve them, notwithstanding the neat little model on the wall. We’re forever trying to handle a three dimensional world with a two dimensional model – as it were.
The Network gives us the same additional degrees of freedom that perspective gave painters who formerly used only two dimensions.
Adopt Social Models and move away from Sequentiality
Adopting networking as the base form for the work environment is achieved through social models – people cluster in communities of common purpose, combining all the Roles necessary to accomplish that purpose. But the greatest benefit of social models is that you can move away from Sequentiality. You can also reach a state where the same construct (i.e., the network) can handle predictable as well as unpredictable situations.
In a social model, we abandon classical sequential business processes and replace them by high level practices and clear rules. We cluster specialized tasks around Roles that are carefully crafted for simplicity and then we group people in these Roles into Communities with single, clear missions.
People in a Community, with clear roles and all the skills to perform those roles, will respond spontaneously to events as they occur by improvising action pathways that combine the skills present in the community. Repeated events will cause the reuse of the same pathway. New events will create new pathways. The Community becomes a self-learning ‘organism’ that increases its collective knowledge as the network of individuals gains in experience by facing more and more events together.
Networks are to functional hierarchies and matrices what Perspective was to two-dimensional painting.
Net-net – a work environment of beautiful simplicity
In a simple environment, then, if you follow the brief guidelines provided above, we will find these characteristics:
- Roles are simple because they have been sanitized to be Elementary, Unique and Clear.
- Processes are replaced by Practices that determine approaches to do business, standard techniques (e.g., MRP, statistical forecasting, Analytics) to solve various problems and policies that establish constraints upon the business – ethical, legal, scientific, regulatory, financial, etc.
- Practices are vetted for simplicity as well, whereby the components of a practice are also Elementary, Unique and Clear.
- People are grouped in Communities of single, clear purpose and mission.
- Processes are action pathways instantiated spontaneously by single-mission Communities – repeated pathways for repeated events; new pathways for unknown events.