As businesses have entered new geographies, developed new products, opened new channels and added more granular customer segments, they have made their offerings more complex with the intention of adding value. But, as a seemingly inevitable consequence, companies also have made it more difficult for customers to interact with them and more unwieldy for their employees to get things done. For organizations, there has thus been a trade-off between good and bad complexity.
In the digital economy, however, companies can finesse this trade-off and increase value-adding complexity in their offerings while keeping processes simple for customers and employees. Consider Amazon.com Inc.’s 10 million products, which create value without confusing customers, thanks to simple customer-facing processes that use digital tools such as search, recommendations, customer reviews and seller ratings to help site users choose among the many available products. Another example is Royal Phillips, which uses and reuses digitized platforms — and is able to offer locally differentiated products in 60 categories in more than 100 countries.
The authors explain how companies can achieve their “complexity sweet spot” in the digital age — that is, the maximum value from varied and integrated product offerings with the simplest processes. The authors’ research suggests that companies operating in this complexity sweet spot outperform their industry competitors on profitability. There are several routes to the sweet spot. One of the biggest decisions is who will lead and manage a company’s complexity, as no one executive (save the CEO) really oversees all product and service development and operations. Whoever is leading a company’s search for the complexity sweet spot needs to lead a cultural change to embed complexity management into the company’s DNA. The good news, according to the authors, is that there are almost always quick wins, and the rewards are, well, sweet.