Turning Organizational Complexity into a Competitive Advantage

It is a time of disruption. New organizations using new technologies are arising daily to threaten long-standing industries. But old or new, every organization is looking to create a sustainable competitive advantage that will either protect them from disruption or allow them to become the disruptor.

This need to find competitive advantage in a digital age is the primary driver behind the unending siren call for digital transformation in enterprise executive suites. As a result, organizations are pursuing a broad agenda of technology-driven business transformations, yet they often struggle to find the elusive advantage they seek.

The reason is that many organizations translate digital transformation into a narrow band of customer-focused, marketing and operational efficiency initiatives. These organizations almost invariably focus these initiatives around using technology to simplify a business process.

There is nothing inherently wrong with this, but there is another, perhaps less obvious approach that may yield a more reliable pathway to competitive advantage: rather than seeking to eliminate complexity, embrace it.

Complexity as a Source of Competitive Advantage?

This idea of embracing organizational complexity as a source of competitive advantage is counterintuitive. Consumers and business customers alike are looking to technology to simplify their lives and their day-to-day interactions.

As a result, enterprise organizations are exploring a wide range of new business models hoping to create platforms and ecosystems that connect their customers and products in new, simpler and more efficient ways. But in doing so, they may be missing the greatest source of competitive advantage available to them: the complexity of their business processes.

The reality is that for every market that an erstwhile competitor can disrupt through some form of simplification, there are ten more which a competitor cannot easily disrupt because of the underlying complexity of the value chain. The value, for instance, in delivering jet engines or researching seed genetics is in its complexity. The companies in these industries are solving hard problems that require complex business processes to do so.

In these cases, the question is how can organizations harness this complexity to create competitive advantage?

Deconstructing Innovation

In a recent white paper entitled, The Innovation Map: How to Create Disruptive Innovation in a Complex Digital World, I explored how organizations could deconstruct complex business processes and expose them as a means to create a culture of innovation.

The purpose of the paper was to demonstrate how organizations could deconstruct and expose complex business processes through modeling techniques, and that in doing so, they would unleash organizational creativity by enabling everyone in the organization to see the big picture in all of its glorious complexity.

What I didn’t explain in the paper, however, was how the complexity itself could be a source of advantage. The reality is that the more complex and sophisticated a business process is, the harder it is for a competitor to replicate it and seize any advantage.

The danger, however, in complex business processes is that their very complexity makes them inherently rigid and resistant to adaptability — a massive liability in a disrupted world moving at light speed.

In the report, I described how organizations should use simple, non-technical modeling approaches to deconstruct their business processes in a way that is easily understood by everyone in the organization. I further explained that by exposing their business processes in this way, organizations would unleash creativity and innovation as their process complexity was laid bare.

This deconstruction process, therefore, becomes a chief enabler of creating advantage from the complexity of a value-creating business process.

By deconstructing a business process and creating a culture of innovation, organizations can get the best of both worlds. They can simultaneously ensure that the complexity of their business processes will generate advantage, but also ensure that they can adapt those complex business processes and that they will serve as a source of future organizational innovation.

My Take

Too many organizations are attempting to reshape themselves into “technology companies.” While on the surface this reshaping sounds progressive, it subtly causes them to move away from their two greatest assets: their deep customer relationships and the advantage they derive from the complexity of their business processes.

Most organizations are solving complex problems for their customers. In the rush to ‘digitally transform,’ it will be those organizations who can create innovation opportunities without undermining the inherent – and value-delivering – complexity of their business processes. These organizations will use technology to expose, adapt and simplify their value delivery models, but do so in a way that preserves and multiplies the core value they provide to their customers.

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This article was originally published on the Intellyx website

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