S i m p l i c i t y : The Next Big Thing?

by Simon G. Bell, The Apex Consulting Group

"Things alter for the worse spontaneously, if they be not altered for the better designedly."
--- Francis Bacon

"Any fool can make things bigger, more complex, and more violent. It takes a touch of genius - and a lot of courage - to move in the opposite direction."
--- Albert Einstein

We believe both of these quotes touch on the key aspect of complexity vs. simplicity. They highlight the power of making things simpler as opposed to the trend of complicating the way we work for reasons of either lack of attention or the need to appear smarter because only “we” understand.

Have you brought additional products or services into your business in the past few years? Have they delivered the increase in profitability you were expecting?

What about your customer base? Have you grown this but found your profitability has stagnated or even gone down although your total sales have gone up?

Are you putting more personal time into “improvement” projects than you were 5 or 10 years ago but becoming anxious because you’re not getting the returns on this effort?

You’re not alone. The business world is waking up to the fact that providing more products, managing more suppliers, introducing more improvements without regularly re-focusing on the few high return activities is sucking up hard-earned profits.

In today's business, complexity is killing profits!

Have you ever thought about making your business simpler and easier to manage as a way to thrive in the current economy?

Probably not. Why? It doesn't seem possible! We have been sold the complexity myth – without complexity results do not follow.

Perhaps now is the time to consider Simplicity.

This is not a new management fad. Our experience from the early 1990s recession in Australia, the Asian Financial Crisis in the late 1990s, plus evidence from as far back as the 1940s, including detailed research on European companies by the international consultants McKinsey & Co, shows that businesses with simpler structures, processes and priorities deliver more profit and sustainability through all the economic ups and downs.

Professor Rosabeth Moss Kanter of Harvard Business School suggested in February this year that simplicity in business may be the next big thing. “But” she said, “Simplification is not the norm, and that’s a problem!” If you’re constantly juggling issues of cash-flow, customer satisfaction and work-life balance, the benefits of keeping things simple are nothing new.

Professor Moss Kanter cites the global financial crisis and General Motors as examples where complexity has led to major problems or failure. In Indonesia we have seen a combination of complex and sometimes contradictory regulations as well as complicated geographical and logistics based challenges magnify the trend towards a more complicated business response to this environment.

The complexity of the Indonesian environment is also demonstrated by the experience of some of the conglomerates and larger domestic firms over the past decade. Complexity has been compounded by unsound financial structures, sharp increases in corporate leverage, reliance on external debt, and the availing of riskier business strategies in attempt to achieve greater success through higher-risk projects and activities.

We have seen that often Indonesian businesses believe the best response to the inherent complexity of the business environment is to add to this complexity by developing and implementing complicated business systems, structures, processes, planning and decision making to “meet the challenge head on”.

Multinationals have also not escaped the complexity trap. Among many factors is the desire to leverage on-the-ground intelligence and perspective. This has led to the development of more complicated structures where local business units are given greater autonomy while simultaneously having to meet head office demands for global standardization.

There is a push for locally customised products at the country level yet head offices demand operations are aligned with global strategy, and, to top off the challenge, in the current economic environment, there is a simultaneous push for cost reduction and significant revenue increases. Fail, and we will reduce your head count further is the reverberating theme.

Adding to the complexity of the situation, some analysts have predicted that the manufacturing sector here will go into recession this year, whether this technically eventuates or not – clearly the global downturn has had an adverse impact on the sector with order requests and employment levels significantly dropping in the first two quarters of the year.

Clearly, the list of failures from complex businesses is getting longer throughout the region and across the globe.

On the other hand, there have been some wonderful examples of comparatively simple businesses achieving great success.

So why don’t people seek simplicity in business? Perhaps it’s because we've been conditioned to believe that business has to get more complicated as management and technology get more sophisticated.

Nothing could be further from the truth! It doesn't matter the type of market you're in, the track record shows that 'un-complicating' your business multiplies your performance and your profits. It can revitalize the morale of your employees and make their work more satisfying. Ultimately it is about increasing the sustainability of your business.

We believe managers have just forgotten this in the hype of the information revolution. In looking back over a number of our business turnarounds starting from the early 1990s, we have found that the benefits to organisations were largely obtained by making the businesses simpler in some way.

What this means for you is that taking out some of the complications in your business will help you survive and thrive against your competitors and give you alternatives to staff retrenchments as the way to cut costs.

What sorts of things do owners and managers simplify? The main things are the business focus, its structure and processes, and the number of products, services, customers, suppliers, projects and plans. But we can also reduce the amount we write in reports, plans, submissions, justifications etc in our businesses by following the simple Now-Where-How approach to business communication.

Our research identified 5 key principles for simpler, better business:

1. Always base improvement on the universal 80/20 Rule where 80% of the benefits come from just 20% of the things you can do

2. Get everyone to learn and use a simple and consistent problem-solving technique, such as the Now-Where-How method or similar

3. Define customer value by asking “what makes our customers more successful” and get everyone focused on the answer

4. Look for the few key “constraints” in your business processes and remove these to make work easier for everyone

5. Before automating anything, firstly simplify it!

By following these principles your business will get better and simpler. They are backed up by international research showing that smarter, simpler businesses outperform more complex ones.

The track record of business focus and simplification over the past twenty years has been to boost profits in the good times and turn around performance in the tough times. What we've been missing from this body of knowledge is a collation of the simple techniques that people have used to make these changes.

Managers need ideas, techniques and products to help them de-clutter their business life and maximize the rewards. Tools are available now for simple problem solving and to handle business situations from 10 year plans to 10 hour crises. One priority setting tool not only tells them the few things that will deliver most of the benefits, but also the things they should not be doing.

Dr. Ian Dover, through the Simpler Business Institute in Australia has committed to delivering these solutions to managers and owners. Through strategic partnership, we are now delivering these solutions to Indonesian-based firms.

Once managers have the right tools, the best part about making a business simpler is that it’s as much about NOT doing things as it is about trying to achieve more.

Delaying the decision to start to simplify your business is to accept higher costs and lower profits. Please act now to put yourself in the best position to thrive - just a small step for you, but a giant leap forward for your business.

You can continue to learn about how to make business simpler and more successful and receive regular ideas and tips to increase your business’ performance by signing in to our complimentary regular communications at www.apex-cg.com.

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You can find out more about Apex's Simpler Business Support Services by visiting our information page at:
 http://www.apex-cg.com/simplerbusiness.

Simon G. Bell, Senior Consultant and Business Coach

Simon is a Senior Advisor with The Apex Consulting Group, a Jakarta based management consulting firm. Apex focuses on transferring to organisations the straightforward management tools they can use to make business smarter, easier and more profitable.

Simon has nine years executive, consulting and coaching experience in the Indonesian business environment. He has led a number of turnarounds and has advised the Indonesia operations of several Multinationals. Sector experience includes oil, gas, mining, energy transmission and distribution, banking, government, publishing, F&B and not-for profit. Simon is fluent in both the written and spoken forms of the Indonesian language.