Complexity Can Kill Competitiveness

by Dr. Donald N. Sweet

Harvard Business Review’s March issue has a special report about reinventing America’s competitiveness.  Michael Porter and Jan Rivkin argue that a nation’s competitiveness hinges on its long run productivity.  Productivity is defined as the value of goods and services produced per unit of human, capital and natural resources.

A recent issue of The Economist picks up the baton from HBR writing about an “Over-regulated America”.  Singling out our sagging health care system, they point out how every hour of treatment requires almost as much time doing paperwork.  Obamacare is scheduled to increase the federally mandated categories of illness and injury from 18,000 to 140,000.  There will now be nine different codes for injuries caused by Parrots.  Really?  Is that necessary?

Complexity, whether at the national or individual company level, creates waste.  The truly important items we need our resources to focus on get lost in all the minutiae.  Having those important few core values, BHAG, brand promise, and quarterly priorities that everyone on the team knows and understands is critical to improve competitiveness.

We hinder ourselves by erroneously thinking we can have a rule for all contingencies.  Not only is that impossible, but it is also extremely ineffective.  The Italian economist Vilfredo Pareto was one of the first to observe that the vital few make all the difference.  Often referred to in business as the 80/20 rule, focus on the few key items can make all the difference in productivity, competitiveness and success.

Yet, so few of our organizations focus solely on those vital few items.  Why?  It often seems to be the cluttered closet syndrome.  We continue to add new items (read rules, systems, paperwork, etc.) into the closet (read business).  But we seldom stop to clean out the clutter already there: rules, systems, paperwork we no longer need to run our businesses effectively.

At one point they may have been important, but have outlived their usefulness.  Take a look at any two page form in your company today.  Is it all necessary for the way you do business today?  What about how that form is used, copied, stored?  Are all of those activities adding value?  Probably not.  Your closet is cluttered with meaningless complexity that is costing you money.

What’s the answer?  Start with determining the important few issues everyone on your team should know, understand and embrace.  They were mentioned above. Core values define the culture, building a team where members hold the same basic values.  Everyone should know the company’s long term or, BHAG (big hairy audacious goal).  That is the organization’s compass reading providing necessary direction.  The brand promise is what the organization agrees to consistently provide its customers.  Southwest Airlines brand promise for years was Low Fares, Lots of Flights and Lots of Fun.  Finally the quarterly priorities, no more than five each quarter, are the commitments the management team makes to move toward its BHAG.

This all takes the fanatic discipline Jim Collins writes about in his latest book, Great by Choice.  Eliminating complexity, articulating the key values and goals and making sure the entire team understands and embraces them is difficult at best.  However, if we want to be more competitive, we need to take on these challenges and overcome them.