2.5 Complexity Reduction

Complexity Reduction as a method to manage complexity 

Complexity Reduction helps companies to simplify their organization, strategies, services, products, processes and information technology. The reduction of any of those areas or parts of them enables the opportunity to simplify other areas in the business. 

Heavy complexity often comes from business expansions which complicate a company’s operating model and lead to higher costs and poor returns. Complexity Reduction finds turning points where products or services fully meet customer needs at the lowest costs. By rationalizing product lines, for example, companies can be able to simplify organization structures and decision making to serve their customers better while also reducing demands on business processes and information systems.

2.5.1 How Complexity Reduction works

Complexity Reduction requires managers to understand the sources and causes of complexity and consider trade-offs between operations and variety or customization for customers. They need to analyze options to simplify products, organization structures, business processes and information systems to save expenses while strengthening core capabilities and increasing the focus on customers. Also managers have to take action to stem the return of complexity by reexamining the hurdle rates for new products and other expansion activities. It is important for them to simplify decision making by clarifying operations and processes.

Complexity Reduction helps detect hidden expenses and allows companies to determine which products are making money, what customers really value and which organizational or process narrow passes are getting in the way of effective actions, setting the stage for greater growth and increased profits.

Companies use Complexity Reduction to identify and strengthen main capabilities, to build the business matching customer needs and to create a disciplined approach to releasing new products or services and trimming those that customers no longer value. Moreover it is used to design an organizational structure to support critical decisions, to Maximize process efficiency and to align information systems with business objectives.