Complexity Thought Leadership Series

To achieve sustainable growth in the Age of ComplexitySM you must
first understand complexity. Learn from our multi-part series exploring
how to diagnose and tackle complexity in your business.

Complexity Thought Leadership Series

Part 1: The Growth Paradox

Many of the actions that companies take in a bid to drive growth fundamentally impede their ability to grow—the Growth Paradox℠.

In our work helping companies develop strategies to thrive in the Age of Complexity, we frequently see a common dynamic whereby companies chase growth in a way that creates complexity, which actually inhibits growth: the Growth Paradox.

Consider the technology company that launched hundreds of R&D projects as part of a commitment to accelerate growth and create a customer-focused organization. The result: a clogged R&D pipeline, with nothing coming to market yet significant product proliferation impairing manufacturing scale and efficiencies and overall on-time delivery rates—a key customer metric.

Or consider the industrial manufacturing company struggling to survive after losing nearly half of its sales in the economic downturn. In an attempt to recover its profitability, it captured volume different in nature from the volume it had lost. The company took on whatever bits of business it could get—scraps of revenue that saddled operations with greater product variety and smaller order sizes. The result: poorer service levels, reduced product availability, unhappy customers, ultimately lower profits, and a cap on growth.

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3 Reasons Why the Growth Paradox Undermines Growth Strategy

1) Companies aren’t familiar with the ways complexity impedes growth


While companies may intuitively recognize how complexity can inflate a company’s cost structure, they frequently misjudge the impact of complexity on top-line performance. In fact, complexity impedes growth in many ways:

  • Impaired service levels. Product and process complexity lead to issues around service, such as poor on-time delivery, quality, or customer service.
  • Slowing innovation. A large number of products (or initiatives) actually clog up the development pipeline, slowing time- to- market.
  • Customer confusion. In the face of higher levels of choice, customers struggle to make purchase decisions and the sales channel is less able to provide support.
  • Higher costs, leading to less margin for reinvestment or higher prices. Complexity costs creep in and working capital goes up, putting pressure on the business.
  • Profit concentration, and risk. Complexity breeds cross- subsidization, often massive ones, that mask the real creators of value in your company.

 

 

Relevant Resources
Learn more about:
- Our distinct view on complexity
- Our expert work in the area of growth strategy
- The results we’ve produced for clients
- Our two books on how to reduce complexity costs and flourish in the Age of Complexity

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Contact us to learn more about how to cut through the Growth Paradox and thrive in the Age of Complexity.

2) Companies underestimate the nonlinear effects of complexity


Another reason the Growth Paradox persists is that many organizations lack familiarity with the nature of complexity, specifically the nonlinear impacts it can have on a business.

This nonlinear relationship means that things can go from good to bad very quickly. There’s also a cumulative effect, whereby the effects of the Growth Paradox worsen with every additional layer of complexity.

In our writing, we discuss Complexity Cost Curve, the curve that captures the notion of system-wide costs introduced as the result of a specific action.

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Complexity costs are the costs you incur in order to have many things, and are typically unanticipated, inadvertent, and often hidden. It is this aspect of complexity—that its costs (or impacts) result from the interactions between its dimensions—that drives complexity costs to grow geometrically with complexity.

As we add more complexity to a business, we also increase the potential number of interactions between those items, and as the complexity of a system grows, the more acute the Growth Paradox becomes.

 
Growth in the Age of Complexity
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Growth in the Age of ComplexitySM

In our latest book, learn how to navigate the Sirens of Growth® and build true scale in today’s new era of competition.

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