Tuesday, November 22, 2011

Complexity creates more complexity

Companies often end up creating their own nightmare. At fault is the lack of a clearly defined company ambition and idea: what the business is all about. Instead, management starts managing (costs), often to the detriment of a successful future product. Optimization creates its own complexity, which is subsequently managed by repackaging identical products to different target groups.

To make difficult things easier to understand, a whole new language is invented to make the unexciting facts seem more exciting (or difficult to understand). Because everything needs to be communicated to different sets of people differently, this creates cost. Cost is what optimization was supposed to reduce, so this must be justified by further layers of complexity and managed by scaling the service of product to ever greater markets and target groups.

Obviously working over a large territory or catering to many different target groups can be considered a means of managing risk, which should guarantee sustained profits in a volatile market. However, working over a large territory with tons of distinct customers creates complexity, which is often managed by segmenting the target group and repackaging identical products to these various, different target groups. To make them seem more different, and to be understandable at the same time, a language must be developed to make unexciting facts more enticing. All of this must be communicated...

...you get the picture.

To reduce costs, increase value to the company and to customers, a simple and clearly understandable consumer benefit is infinitely more effective. Both the company and its customers understand what the product / service is good for. To communicate it costs pennies instead of dollars and complexity is eliminated. Managing all of this is easy, because everyone knows what the goal is.

Seems logical, but research clearly shows, that while 80% of managers think that their service offering is unique, only 8% of their customers would agree.