While rapid growth is what most top executives wish for, it can create a host of challenges. A company called Tech Shop, for example, grew 120% from 2012 to 2016, earning it a place on Inc. magazine’s list of Silicon Valley’s fastest-growing companies. Still, “like many fast-growing companies, it is struggling under its own weight,” Inc. reported in December 2016. A year later, Tech Shop was gone.
Why? The words “struggling under its own weight” provide a hint.
As every company, large and small, knows well, the world in which businesses compete is growing ever more complex. Among the forces they face are disruptive technologies that emerge with increasing frequency, ever more demanding customers, widespread markets with different rules and regulations, multifaceted sales channels, and hyperextended supply chains.
Such complexity, however, should be seen as an opportunity. By streamlining their organizations, operations, and decision-making, start-ups and other rapidly growing organizations can gain a real competitive edge over their slower-moving rivals.
Unfortunately, that’s not how most companies respond. Instead, they add cumbersome structures, burdensome rules, and inefficient processes in hopes of meeting complexity head-on. The resulting high levels of “complicatedness” end up slowing reaction time and hindering productivity. The inevitable outcome? Growth slows and margins fall.
Companies that successfully combat complicatedness find that the rewards are significant. In a survey of corporate leaders, managers, and employees at more than 1,000 companies, conducted by the Boston Consulting Group, the results were striking: By streamlining its R&D operations and increasing cooperation with suppliers, for example, one large industrial company produced a $400 million boost to revenues and an 11% reduction in the time required to get new products to market. Companies that embrace simplification also typically see improved employee engagement with 50% higher motivation of employees.
In general, less complicated companies achieve above-average revenue growth and profit margins because they’re more innovative, more efficient, and quicker to bring new products and services to market. In simplified organizations, people get things done.
One might think that larger companies by definition are more entangled in complicatedness than smaller companies, but research shows that not to be the case. In fact, complicatedness can affect even the smallest companies if their processes, systems and cultures hamper efforts to respond effectively to changing market conditions and customer demands.
The Simplification Solution
While complexity is a fact of business life, complicatedness doesn’t have to be. The antidote is called “Smart Simplicity.”
Smart Simplicity differs from traditional “efficiency” solutions by taking into consideration the drivers of behavior—the context within which employees work—and then shape this context to achieve desired behaviors. This approach recognizes that performance is a result of what people do (i.e., their behaviors) and that behaviors can be influenced by smart adjustments to the company environment (the context in which work is carried out).
Benchmarking can help companies understand how complicatedness affects their productivity and performance. But it is only a beginning.
Here are four steps that can help bring about lasting solutions.
- Smart Start. Identify performance issues caused by complicatedness through interviews, for example. Conduct high-level context evaluations. This will uncover the complicatedness dimensions that require further analysis.
- Diagnosis. Understand the root causes of these performance problems by analyzing why people adopt unproductive behaviors. This is typically accomplished through in-depth employee interviews focusing on specific issues that are linked directly to the performance problems identified, such as how a lack of cooperation among employees, managers, and headquarters impairs performance.
- Solution Design. Develop interventions that address the underlying causes of specific performance issues. Such interventions should consist of carefully targeted changes that promote desired behaviors and produce a clear and measurable impact on performance.
- Implementation. Apply the specific interventions by establishing a project management office to prioritize solutions, create an implementation roadmap, drive the change process, and monitor improvement.
Every company, in Silicon Valley and elsewhere, is looking for the path to faster growth and higher profits in an increasingly complex and competitive business environment. Many are struggling to find it. For some—like Tech Shop—the answer may come too late. Rather than blaming external factors for their problems, successful companies examine their own organizations more closely, identify where complicatedness has crept into their processes, systems, and activities, and pare it back.
Educating company leaders and giving them the tools for thinking and acting with a “Smart Simplicity” mindset is a critical aspect of this process, enabling them to cope with challenges, uncertainty, and complexity with intelligence and insight. Successful implementation yields improvements in performance, productivity, and employee engagement.
Henning Streubel is a San Francisco-based Senior Partner at the Boston Consulting Group (BCG) and is the Managing Director for BCG’s West Coast system.