Management SummaryStern Stewart Research // Volume 66
Under the umbrella of ‘functional excellence’ almost all companies have pursued major, mostly successful efficiency programs. Functional cost went down, standardization increased, automation went up. Also, speed and flexibility of internal support functions to react to changing business needs have improved. So are we all there yet? When business reality hits the ground, we all know about the frustration of corporate complexity and bureaucracy still being there: non-value adding alignment rounds, long email lists, slow decision making, unnecessary service levels and the like. Fighting it to sustain the new normal is a difficult task. The problem: Cost of complexity is not visible in the P&L. And only pushing standardization and automation further will not serve the purpose.
To secure already achieved savings and to initiate the next optimization wave, complexity needs to be managed in a better way. It is key to distinguish between external and self-induced complexity. While the first mostly reflects customer demands that have to be met to stay in the market or deals with the application of new regulatory frameworks, the latter needs to be in focus. We believe in walking the CoRe (Complexity Reduction) toolbox. CoRe is a distinct set of widely known optimization instruments: zero-based dimensioning, delayering, sound internal demand management, lean governance, end-to-end process engineering – to name just a few. But the tools need to be directed to the company-specific drivers of complexity. And the focus is on execution, on masterful leadership, on living up to it and on following through with it.
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