There are two lines of thought in most businesses; one says: “give the customers what they want, innovate, create new products, give them choice”
The other says: “rationalise, focus, strip it back, cut the tail, decomplexify” (not strictly the Queen’s English that one)
The irresistible force and the immovable object. On one hand flexibility drives value, on the other, complexity drives cost. It has caused more than one bust up
The accountants are the problem
They can’t decide how to allocate overheads to different products (sales men’s time, training costs, change over costs, the lady who pushes the tea trolley…) Who should bare the brunt of the costs?
- Should it be the smaller volume products? They require more time and effort, but how much extra cost? And don’t you run the risk of stifling every new idea at birth?
- Should it be the big volume products, they take up most of the resources, most of the operational time, most of the space. But they are low maintenance, easy to manage, aren’t you hiding the issue?
These same accountants have a cunning solution, A.B.C. (Activity Based Costing) or allocating cost by the driver of that cost, but anybody who has ever tried ABC will tell you precisely how cunning it is. (Exactly how many of those call transfers are driven by that new product?)
So what are you supposed to do? Follow the two-part mantra:
Don’t complicate, unless you have to
Part 2 “Unless you have to”
If your customers want complexity, really want complexity, then give it to them, exploit it to the hilt:
- Baskin Robbins have thousands of different flavours of ice cream
- Amazon will send you any book under the sun
- McDonalds have a store everywhere you could possibly want one
- Chittleborough & Morgan of Saville Row fame will make a suit, one off, just for you, that fits only you
That is what they do, and they charge for it. And customers are prepared to pay. If you can charge a premium for it, complexify (ahem) away.
Part 1 “Don’t complicate”
Get rid of the complexity that customers don’t care about:
- Too many suppliers, (how many layers of disaster recovery do you really need?)
- Layers of management (how many have you got?)
- Systems and data bases (one spreadsheet tracker, or one hundred?)
- Component parts (do you need all of those different nuts and bolts?)
- Fiddly in house processes (should you run your own payroll?)
- Dedicated specialist teams (large account handlers, complex account handlers, bespoke account handlers, …)
The clever (and hard) bit is to be clear about what a customer is happy to pay for, and what they are not. But then…
Any idiot can make it complicated
Read another opinion
image by bjornmeansbear
Hello James
Insightful and provocative. I simply wish to add several points::
A. The two trains of thought are neither opposites nor antagonistic towards each other. I’d argue that rationalisation can show up as innovation and vice versa.
B. One should not be bound to either of these trains of thought. Ideologies/frameworks make great tools if used as tools, they make poor masters.
C. Heidegger got me present to the fact that one mode of being obscures other modes of being. That by looking at your face I am not looking at the back of your head. This is so with whatever we use – ideologies, frameworks, approaches, tools…- and so it is important to build diversity into the process. To look at the situation at hand from multiple vantage points. That is to say there are likely to be more ways at looking at the situation than the 2 you have highlighted here.
Thanks for writing an interesting piece.
Maz
Hi James,
Seems to me that that the firms that you identified are giving their customers what they want and they are charging for it as you point out. However, they also seem to have achieved that balance that is the delivery of complexity in a profitable way but with retained flexibility. For Amazon, they deliver complexity and retain flexibility and profitability through the way they deal with their suppliers.
What I’m saying is that I don’t believe that complexity, flexibility and profitability are mutually exclusive objectives. Are we in agreement?
Adrian