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Tag Archives for " complexity "

How to manage complexity while expanding your business

We have to admit that the world has become more and more complex over the past centuries, and it is even truer for the past decades! We are interested in business and it is not less obvious about it. Interaction and interconnectivity between people are a proof of this increasing complexity in today’s business world. Indeed, the first ones who started to think about applying complexity science to management did by the 1990s, which is pretty early. However, technology and systems were not developed enough to be able to manage complexity at this time. Jost Hoppermann, analyst in the technology and market research company Forrester Research, defines business complexity as the fact of having several interdependent and interconnected stakeholders, IT systems and organisation structures. In effect, all these interactions involve many people: employees, suppliers, clients, investors, and even competitors. Besides, organisation structures involve several divisions, subsidiaries, as well as joint ventures, and everything needs to be managed properly, at the same time, by many people who consist the business. Therefore, we have no choice but to admit that complexity is unavoidable and omnipresent in great businesses. However, businesses have to expand themselves and their relationships with other parties if they want to survive against competitors. You can find more about business relationships in Vivek Sood’s book The 5-STAR Business Network (http://bit.ly/5-STARBN), which will teach you a lot about business networks and relationship building. That is the reason why the only solution is to learn how to manage this complexity. Thus, the concept of complexity management appeared. It is a business method, which aims at optimising the complexity in companies, to make it beneficial and profitable. The consequences of complexity appear at every step of the production process and along the value chain. That is the reason why nobody should neglect the effects of complexity. In effect, depending on how you manage complexity, your business can whether be very successful or go bankrupt in very little time. An effective complexity management process along the entire supply chain can increase tremendously the profitability of your production process. Complexity can be good, but its effects have to be anticipated beforehand the implementation of new decisions made. Indeed, as we already know preparation is crucial and the effects of complexity can also explain this. Preparation can avoid many troubles by anticipating this complexity and acting accordingly. To be beneficial, complexity needs support. Thus, systems and processes have to be implemented to support complexity. That is the reason why companies must include them in their strategies. The efficiency of complexity management relies on several pillars that you must pay attention to, but we will see those pillars and complexity management methods in a later article. To conclude this article, let us say that complexity is natural for business that decide to expand and grow in their market, as well as in new markets. The important point to remember here is the importance of its management. In fact, complexity is not a problem itself, but its bad management is. Complexity is essential, and it can be very profitable for your business if you use it properly and through a smart approach.

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. business-discussionOn 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: complexity vs performance 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).

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.

New trends for management implied by the complexity increase

We have no choice but to accept that complexity is omnipresent in every organisation today. Complexity took a very important place in organisation because it is bigger than it used to be one century ago. For this reason, managers and executives have to learn how to run their business while managing complexity. In a previous article, we talked about the pillars of complexity, on which they must rely: strategy alignment, transparency, sustainability and modularisation. Then, complexity involves new methods of management for organisations. Therefore, this new trend is the cornerstone of a great evolution for future leaders. In effect, the increase of complexity is an opportunity for leaders. Managers and executives who would succeed in managing this complexity better than others will become leaders in their organisations and in their markets. First of all, competition is not a solution. Although everyone wants this main role of the leader, they have to work in team within the company. None manager can succeed alone in this very complex system. The leader is important but this one has to work with a team, which supports him. Working in a team is the key to good communication, close communication between the members. In this situation, people have to work in united systems that enable efficient communication. Small groups will think faster and more effectively, towards one precise goal. Thus, decision-making will be much more effective than if each one tries to work on his own to become the leader. The new trend for complexity managers is that they have to be very reactive to any situation. In effect, in today’s complex systems, a leader is someone who will be able to gather the conditions necessary to improve faster. He must be able to facilitate fast and innovative processes that are supposed to make adaptation to changes easier. That is the reason why this new trend is an opportunity for new leaders. Rigid control is not the solution to complexity. Despite what we could think, rigidity will not prevent organisations from complex systems. It could even be the contrary because rigidity keeps us from seeing what is really happening in the entire system. In fact, we would think all our predictions would be accurate whereas anything could happen. Systems have to be flexible so managers and executives can act consequently and then find adaptive solutions. This new trend also includes the importance of relationships. In complex systems, interactions and interconnections are the principal characteristics of our organisations. That is the reason why relationships and business networks are so important nowadays. Therefore, leaders must also be those who think permanently about their business network. It is impossible that any organisation cope with complexity without building a proper and efficient global business network beforehand. Future leaders cannot neglect this point if they want to manage complexity in their organisations successfully – or at least, as successfully as it is possible, taking into account the riskiness of our current complex systems. The importance of relationships in the construction of your global business network for complex systems is analysed deeper in Vivek Sood’s book, The 5-STAR Business Network (http://bit.ly/5-STARBN).

Complicated Systems vs. Complex Systems

Complex organisations have always existed, but we have to admit that the level of complexity has tremendously increased over the past centuries, especially over the past decades. Complexity now touches everyone, and every organisation. This is something unavoidable, and that is the reason why companies have to learn how to manage it, how to live with it. The most important difficulty met because of complexity is prediction. In effect, today’s systems are so complex that it becomes very difficult to make predictions about what will happen in the future, even though in a close future. Interactions between the parts that constitute the systems are innumerable and this is what makes them complex. To be able to manage complexity, the most important thing is to understand that it is not the same as complicated systems. If you want to be a leader, you should be aware of the difference between complicated and complex. You cannot pretend to be a leader without understanding these concepts because they can actually define your business outcomes. In effect, managers often confound complicated and concept whereas they are two very different concepts, and the biggest mistakes come from this confusion. Complicated systems are easier to manage than complex ones. Indeed, complicated systems also contain many parts, as well as complex systems. However, in a complicated system, they usually follow a pattern, which make it much easier to make predictions and to manage the system. On the other hand, in complex systems, interactions do not follow any pattern and that is the reason why predictions about the future are impossible.

 WHAT MADE SYSTEMS MORE AND MORE COMPLEX?

Nowadays, systems are built by many systems. Thus, systems are complex because in one great system, there are actually many parts that are systems themselves! At first, small parts were connected, which made the systems; but then, systems have also been interconnected, which made bigger systems, and so on. This was because of the Information Technology revolution. However, it is possible to use these IT systems to manage this very complexity. Thus, everything is interconnected. Business networks have become great and that is what made them complex. Vivek’s book, The 5-STAR Business Network (http://bit.ly/5-STARBN), explains the functioning of great business networks, and its complexity.

WHAT IS COMPLEXITY THEN?

As we said, complicated systems follow patterns and accurate predictions are possible to make. Complexity is a little more complex, if I may say so. One of its characteristics is multiplicity: the number of interactions is difficult to determine, especially because it can be infinite. In effect, there are so many systems that are somehow interconnected that it became impossible to be aware about all the interactions. We are not even able to determine the number of systems that are interacting together, so how could it be possible to make predictions about them? The second property of complexity is interdependence. Many parts are connected and they form a system. Then, these systems are also connected. Consequently, every part of every system depends on many other parts and systems that can affect them in many different ways. Besides, if one connection affects many parts, the consequences are also multiplied, affecting again many interconnections. Thus, the multiplication of connections involves the multiplication of consequences, which might explain the inability to predict any of these consequences. A third main property of the concept of complexity is diversity. So many systems are related that they cannot be alike. The result is obviously heterogeneity. Therefore, these properties of complex systems imply many difficulties, including inexplicable situations sometimes. In fact, the consequences can either be positive or negative for your business because of unexpected interactions and interactions between systems that are already complex themselves. When all the results of all the interconnected systems and parts are put together (because results are also interconnected), the final situation can seem crazy. You may think bad results can come from nowhere, but this is actually not true because every decision you make is important. In fact, one decision-making has not one unique consequence on your own business, but it has many consequences (whether they are positive or negative, whether they are big or small), on many systems, organisations, or businesses. Although you cannot explain all the consequences of these decisions you made, you have to learn how to manage complexity, to limit the uncertainty, by making the right decisions. Sometimes, you might not see the consequences of your decisions, but they can be very important and determining, even if hidden and inexplicable. To summarise, the difference between complicated and complex systems is crucial because the consequences are not the same. Predictions are accurate in complicated systems whereas they are not in complex systems. Although you cannot understand or explain everything in complex systems, you have to manage it the best way you can, in order to avoid great mistakes that could be fatal for your business. What can be interesting, to conclude and summarise the concept of complexity, is author Jeffrey O’Brien’s writings. He thinks, “‘Complex’ is a synonym for ‘unpredictable’ – or at least not easily predictable”. According to him, “interactions are not linear, but emergent”, and he also says, “computers can help, but they must be augmented with perception, reasoning, cognition, and intuition”.

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