How often do companies succeed to create value and achieve innovation in this age of 'great complexity'?
The business environment today is more complex and uncertain than it was a decade ago due to a combined effects of digitisation, connectivity, social feedback, globalisation and changes in consumer behaviour. Companies have 'Big data' available and analysis coming at them all the time; and they feel the pressure to use this information in order to develop better products and services. However, too often data-driven organizations miss the greatest opportunities for creativity.
In truth, are companies really creating value or confusing customers with contradicting messages? As Peter Drucker once said:
"there is nothing so useless as doing efficiently that which should not be done at all."
Many businesses are responding to industry changes with complexity through a proliferation of structure, processes, procedures, metrics, scorecards, incentives, committees, clusters, etc...and when they do so, they give up value.
The 3 principles of Simplicity
Businesses today have to address the imperatives of simplicity and business model innovation by following three major principles:
1. Monomaniacal focus: the ability to stay focused on a singular purpose.
2. Core discipline: the ability to stay true to the original purpose and to say no when something doesn’t fit into the strategy.
3. Distilling patience: the ability of reducing to its essence the substance of a company’s offer while waiting for value to be created and new capabilities to be built.
There is a continuous effort from leaders to transform and change businesses in order to meet the challenges of complexity by applying the latest management thinking and best practices. However, most companies yet find their business models increasingly out of sync with their environments and there are understandable reasons why companies fail to transform themselves.
Firstly in today’s business past performance is not indicative of future results anymore and secondly a false sense of security based on solid short-term financial performance may cause companies to neglect long-term competitiveness – the decline of BlackBerry or Nokia are an example. Companies that have focused on simplicity are Amazon for shopping, eBay for selling and Google for searching.
Amazon, for example, is committed to a long-term view and consistently generates razor-thin profits because it continually reinvests in its future — this is how disruptive innovation is delivered.
Simplicity requires companies to see through the superficial complexity of a situation straight down to its essence with the belief that it is always possible to drive improvement by simplifying solutions.
What is your view? Please share your ideas and experiences on the subject.
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