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April 9, 2021

Complexity: The Enemy of Agility and Execution

By Peter Moore

As companies race to adopt new cloud computing technologies and systems to effectively compete as digital enterprises, they quickly discover that with new systems, applications, and processes comes monumental new complexity.

At a fundamental level, legacy systems of record, which are critical to running core operating functions, like Finance, ERP, CRM, and HR were not designed to seamlessly connect with key systems of engagement or systems of intelligence used to create sustainable customer experiences.

At a practical level, developing and deploying new systems of engagement and systems of intelligence requires very different skills and capabilities than maintaining systems of record.

Taken together these two levels of complexity, if not dealt with properly, can bring a company’s operating performance to its knees.

The Hard Dollar Costs of Complexity

The Hackett Group’s benchmark study on the cost of complexity documented that:

  • Companies with higher than average technology complexity spend 25% more than average companies and 58% more than companies with low complexity.
  • The most significant cost factor is the number of applications per end user:
    • Companies with high numbers of applications employ 27% more FTE’s than average companies.
    • World class IT functions support 44% fewer applications per end user than typical companies.

The chart below shows the significant cost variance impact on operating performance between high and low complexity.

Hackett Benchmark Data Reveals Elevated Operating Cost in G&A Functions with High Technology Complexity

Source: https://www.thehackettgroup.com/blog/making-the-case-for-technology-simplification/

Significantly reducing technology and process complexity will not only improve your operating performance but can dramatically impact your organization’s agility, adaptability, and speed to market.

The Root Causes of Complexity

In addition to documenting the hard dollar costs of complexity, the Hackett Group study also identified the top 10 root causes of technology complexity:

  1. Lack of standards or adherence to standards
  2. Outdated, inadequate technology/data architecture
  3. Business cases that fail to identify compatibility issues, redundancies or other conflicts
  4. Mergers and acquisitions without systems consolidation or integration
  5. Rapid growth
  6. Lack of system sunsetting or asset management program
  7. Deferred maintenance, updates, upgrades
  8. Rampant customizations to applications
  9. Poor data governance
  10. Shadow IT

Deploy a Trapped Value Recovery Program to Reduce Complexity

Over the past five years, I have worked with CIOs and other C-Suite executives to reduce complexity by deploying our trapped value recovery program shown on the slide below. The goal of this program is to recover scarce resources, budget, and capacity by identifying legacy systems and processes that can be either modernized, consolidated, replaced, or eliminated. When done fully and effectively, it significantly reduces the complexity of all the processes and systems of record needed to operate the company.

Trapped Value Recovery Exercise

Simplifying complex, redundant, and siloed systems and processes that dilute the business value of IT

  • Identify and unlock trapped value in legacy IT systems, applications and processes.
  • What specific systems of record are candidates to be:
    • Modernized
    • Consolidated
    • Replaced
    • Eliminated

Conclusion

Companies that want to compete as digital enterprises need to operate at the speed of change. Any level of complexity will slow that speed down and compromise your organization’s ability to outperform your competition. Being able to reduce complexity and increase agility is fast becoming the new standard of operating excellence. 


 

This article originally appeared on Peter Moore’s newsletter.

- About The Authors
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Peter Moore

President at Wild Oak Enterprises, LLC

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5 Comments

  • Gilles Mourgues Apr 22, 2021 7:05 pm

    Dear Peter, very nice article, talking about number of apps per end user, are there any metrics (top performers, high, middle, low) ? thank you, Gilles

  • John Styffe Apr 12, 2021 11:59 am

    Actually complexity is a distraction. There are many who like complexity because it is stimulating otherwise thy get bored with simplicity

  • Knut Woller Apr 10, 2021 5:51 pm

    Dear Peter, I read the article mostly because the title does not make any sense to me. I also followed the link to Hackett Group, just to find an infographic which claims to show results of some unpublished study they may have performed with an unknnown sample of companies - or not. No sources given. Forgive me for regarding that as a baseless claim, even though it is plausible. Hackett Group's title is "Making the case for technology simplification", which I fully understand. What they describe as initial situation, however, is not complexity (which often is time-variant), but complicatedness, which is still an ordered system that can be analyzed and understood. And I fully agree with getting rid of unused applications, which is in the spirit of Lean Management's elimination of waste or ITIL's continuous improvement. All of that is about efficency: Doing the same (or more) with less resources, thereby saving money and effort. Complexity, on the other hand, arises from unknown agents in my system (e.g. users of web-services) and/or unknown interactions (e.g. within cloud microservices or at intransparent service providers), resulting in a system which may be in a different state tomorrow than it is today without me performing any known change to it. While this may indeed endanger execution (most processes assume order and predictability), it actually calls for agility (i.e. the capability of quickly adapting to change). Which makes complexity not an enemy, but a friend of agility. Predictability, however, is an enemy of agility, because agile methods have no real advantage in ordered systems. You are correctly claiming that complexity needs to be dealt with properly, but the article then returns to mundane measures of simplification. The so-called "root causes of complexity" do not actually cause complexity (our environment does, and we as humans do). Working on those root causes is commendable in the spirit of increased efficiency, but actually reduces business agility. Little diversity and a high degree of standardization make it harder to adapt to change quickly. And being able to adapt requires more resources than running a lean shop. That being said, I not only disagree with the title, but also with the conclusion: In order to "operate with the speed of change", we need to embrace complexity and learn to live with it and in it. The reductionist approach of finding "trapped money" does not help much with that.

  • Mario Lopez de Avila Munoz Apr 9, 2021 7:41 pm

    Just a terminology suggestion. In my humble opinion, the authors mention the term Complexity over and over again but constantly refer to Complication. For many years, thanks to the work of Dave Snowden et al., complexity professionals have distinguished between a Complicated domain (Orderly, Predictable, although the relationships between cause and effect are not evident) and a Complex domain (Unordered, Unpredictable and without Cause - Knowable effect rather than in hindsight). You will find a lot of information on the Cognitive Edge website or Cynefin.io, the Antro Complexity wiki.

  • Philippe Apr 9, 2021 7:29 pm

    The term complexity seems to mean different things to different people. Complexity thinking (please see Cynefin framework) talks about unknown unknowns that are to be explored. This is a space where probing prevails to eventually identify emergent patterns that you prove through repeatability (liminal) and once the pattern become predictable it moves into known domains where you can plan and predict. Agility very much prevails in the Complex space as rapid cycles of experimentation create the necessary learning to make sense of the situation. In Complexity as Complexity Thinking, agility is very much your ally. With this said, CRM, ERP, HR systems are all pretty much known quantities. By nature most of the technology that has been built is a known quantity. In Complexity language it is "Complicated", like a watch or a car engine may be. There is always a roadmap of what to do to fix those, and never enough capacity to give it attention. Experts can say what to do, but the reality is that Enterprises need the culture that they don't have to call in the experts. The reality is that the issue is not with the systems, it is with the culture. We should fix as we do. Fighting the debt and legacy is an everyday job. If the answer is to come and clean what people let rot, the culture of leaving things to rot will never get solved. The assistance becomes a temporary patch that keeps the consultants in business. And again, bringing real solutions is a true Complex problem as it involves so many unknowns and human beliefs and variability. It is also where the Lean culture mixes with the Agile culture.

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