New research confirms the financial crisis has significantly exacerbated business complexity. A recently released survey reveals that 86 percent of firms face increasing complexity in their operating environment or organizational structure over the past three years.
In the survey for the report titled, The Complexity Challenge: How businesses are bearing up, only 22 percent of senior executives think their organizations are well prepared to confront complexity in the future. More than one in four of them describe their firm as ‘complex and chaotic.’ The most prominent reason for the spiraling complexity is the greater expectations of customers. Complexity stemming from globalization or technology rank much lower in the list of causes.
The report also explains the wide range of measures companies are adopting to tackle the complexity; from cutting down management layers to simplifying product portfolios and processes. “It is clear from the research that complexity has become a constraint and a risk for firms,” says Abhik Sen, editor of the report. “Our study shows that some of the most successful companies today are the ones that are tackling this challenge head on by simplifying their organizations or business practices.”
Other key findings in the report include:
- The single biggest cause of complexity is greater expectations on the part of customers. Increasing customer demands for more choice in the quality and range of products and services are providing the biggest impetus to complexity. The second most cited cause of complexity in the survey is regulation.
- Complexity is exposing firms to new and more dangerous risks. Complexity has significantly increased the risk exposure of nearly one in five firms. The majority of survey respondents say complexity is affecting the ability of their firms to change business processes and is hindering the introduction of new products and services.
- Businesses are focusing on technological solutions to tackle complexity. Simplifying information technology systems seems to be the most popular way to tackle complexity in business, along with efforts to simplify or consolidate product and service portfolios. As a source of complexity, though, technology comes in only at seventh place in the survey.
- A majority of firms have an organizational structure that is adding to complexity. Nearly three in five survey respondents say that the organizational structure of their firms is exacerbating complexity. Almost half (47%) say it is difficult to work out who is responsible for what at their companies and 39 percent say that, as a result of the lack of transparency, there is considerable duplication of effort.
About the Research
The complexity challenge: how businesses are bearing up is an Economist Intelligence Unit (EIU) report commissioned by the Royal Bank of Scotland. The research is based on a worldwide survey conducted by the EIU in October-November 2010 of 300 senior executives from a wide range of industries. Approximately half the respondents represent firms with $500M USD or more in annual global revenue. Over half the respondents are C-level or equivalent and the others are directors or senior managers. A minimum of 125 respondents are from the finance function and a minimum of 125 represent functions other than finance. The Economist Intelligence Unit bears sole responsibility for the content of the report.
About the Economist Intelligence Unit
The Economist Intelligence Unit is the world’s leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com.
“Nothing can stop someone with the right mental attitude from achieving their goal. Nothing on earth can help a person with the wrong mental attitude.”
3rd President of the United States of America (1801 – 1809)
What role do capabilities play in successful mergers?
Too big to fail has proven to be a flawed notion. In The Path to Coherence, Booz & Company partners Gerald Adolph and Paul Leinwand continue their discussion on the role of capabilities in mergers and acquisitions (M&A) and explain why pursuing a capabilities-driven M&A strategy produces more successful companies that enjoy a right to win.
The Path to Coherence is the second of a series of five interviews focusing on capabilities-driven mergers and acquisitions. Other editions include:
- The New Meaning of Scale, part 1
- Capabilities Roadmapping, part 3
- Integrating Capabilities, part 4
- Advantaged Capabilities, part 5
About the Authors
Gerald Adolph is a New York-based Senior Partner with Booz & Company with a specialty in strategy and operations for technology-driven businesses. His work primarily focuses on assisting clients with growth strategy, new business development, and industry restructuring. He has led numerous assignments in corporate and portfolio strategy as well as business unit strategy. In addition, he deals with value chain and industry restructuring driven by technology changes, and how companies respond to these disruptions and opportunities. Gerald is the co-author of Merge Ahead: Mastering the Five Enduring Trends of Artful M&A with Justin Pettit. To read Gerald’s complete biography, click here.
Paul Leinwand is a Booz & Company partner based in Chicago. He works in the consumer, media, and digital practice and focuses on capabilities-driven strategy for consumer products companies. Paul is the co-author of The Essential Advantage: How to Win with a Capabilities-Driven Strategy. To read Paul’s complete biography, click here.
Increase the impact of customer insights and analytics. How to break down the barriers between the analytics community and the business.
Data is omnipresent and within our grasp yet business truths are still elusive. Finding meaning in that data requires sifting through droves of extraneous information for business insight. It means distilling raw information into a “story” about our customers, our business growth levers, and the business challenges we face – all with a view of moving the business forward.
To extract this information, businesses have found growing within their midst an “analytics community” – groups of data crunchers clustered in back rooms, mining information warehouses and marketing databases for – what exactly? The answer is not always clear, because the value of the information is not yet fully realized or leveraged.
Over the past two decades, data-rich companies have found their analytics teams playing the role of internal service providers. They are tasked with mining through data to find answers to particular business problems. These people – the statisticians, database marketers, modelers, programmers, market researchers and analysts of all stripes – are the people who sit between an organization’s mushrooming information sources (databases, market research studies, marketing campaign analytics, predictive modeling results … the list grows infinitely) and a business output.
But it’s no longer enough for analysts to stay within their silos of expertise and crank out analysis. The analyst community cannot measure its worth by how quickly reports are delivered, or how happy those insights make the people who ask for them. The analytics community must emerge from the service provider mindset and into one of driving business success. Analysts have the privilege and the obligation to ensure that their organizations fully leverage the power of their corporate data banks to propel the business forward.
The translation layer
For large organizations with many lines of business and deep, rich databases, making sense of information has become a business itself. What is needed now is a “translation layer” to ground businesses in fact-based decision making.
The analytics community is ideally positioned to become the translation layer. They have the skills to see the whole picture where everyone else sees only parts of the puzzle. They can provide clarity on strategic issues. But first, they need to move out from the back room and connect the dots across the business to ensure the puzzle makes sense, and how, within the context of the organization’s strategy, its data could be put to maximum use. This is when analysis evolves into insight and when businesses are able to compete on analytics.
From service provider to business driver
As data becomes increasingly central to organizations – and a key business enabler – the analytics community needs to evolve from service providers to business drivers. It is no longer enough to hand over answers to small, narrowly defined business problems. Analysts must work to become the essential “translation layer” between the wealth of an organization’s insights and profitable business applications.
Here are some ways to make that happen:
Better business knowledge
The analytics community must step outside of their silos of expertise to better understand the business overall. They need broader exposure to business strategy and priorities, business and financial performance, and market context. This means investing the time to help them better understand how the business makes money so that they are in a better position to support greater business growth and move the business forward. Investing the time to train and develop this knowledge base will change the kind of insights that are generated – and increase the value the analytics community can bring to the table.
Better return on insights
Analytics teams must align requests to the strategic priorities of the organization. They need to look both at how the business will benefit from where time is spent, and at the opportunity cost of NOT spending time in places where it will yield greater returns. Treating analytical resources like marketing dollars will help ensure wise investment.
Clear explanation of results
Analysts need to make connections across the insights team to fully understand problems and opportunities within a broad, full-picture context. They must reach out to analytical teammates (in modeling, database marketing, research, finance) to connect the unconnected. Insights must be thoroughly rendered and clear, making them easier to understand and act upon. Time must be invested for analysts to become better communicators (both written and verbal) to improve information clarity.
Business analytics teams love digging through data to discover statistical patterns that inform a problem. Executives are hungry for fact-based solutions to their business challenges. Follow the suggestions in this article to pair these two groups successfully – and improve your organization.
About the Author
Lori Bieda is the Executive Lead for Customer Intelligence Solutions across the Americas for SAS. Prior to SAS, she was Vice President, Client Insights and DB Marketing at Canadian Imperial Bank of Commerce (CIBC) and was responsible for the creation of marketing and analytics strategy for the bank.
StrategyDriven Podcasts focus on the tools and techniques executives and managers can use to improve their organization’s alignment and accountability to ultimately achieve superior results. These podcasts elaborate on the best practice and warning flag articles on the StrategyDriven website.
Special Edition 56 – An Interview with Andy Kanefield, co-author of Uncommon Sense explores how to create greater organizational alignment while at the same time maintaining the diversity of individual perspectives that together enables an organization to be more successful. During our discussion, Andy Kanefield, author of Uncommon Sense: One CEO’s Tale of Getting in Sync, share with us his insights, approaches, and real-world experiences regarding:
- the definition of sync
- quantitative and qualitative benefits of achieving organizational sync
- physical, operational business systems that contribute to organizational alignment and how to get them into sync
- varying types of individual personalities and approaches to work and how to align these to the achievement of the organization’s goals
In addition to the outstanding insights Andy shares in Uncommon Sense and this special edition podcast are the resources accessible from his website, www.Dialect.com. Andy’s book, Uncommon Sense, can be purchased by clicking here.
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About the Author
Andy Kanefield, co-author of Uncommon Sense, is the founder and CEO of Dialect and a member of the Neuroleadership Institute. Dialect helps CEOs and presidents manage the relationships between their organization’s divisions and departments in order to align their employees’ efforts. To read Andy’s complete biography, click here.