Economist Intelligence Unit: New complexity research


HOT OFF THE PRESS!

The complexity bandwagon just keeps rolling along. Hard on the heels of a report on Complexity from KPMG here are the latest findings – see Executive Summary below.

If you find the video and summary interesting but, perhaps, “woolly” or a bit light on practical, quantitative, solutions we will be delighted to help.

At Ontonix we offer a clear, concise, definition and rigorously tested scientific solutions to this important topic that others appear content to approach from a qualitative angle. It certainly gives the impression of being more about marketing based upon COMPLEXITY, quite rightly, being identified as a major issue for modern business in an inter-connected global society.

Alternatively, if this is your preferred version of complexity or you are content to read about it rather than take decisive action, I will provide you with a full copy of this report along with those of KPMG, IBM, McKinsey and AT Kearney. Just drop me an email:david@ontonix.com Hopefully I can be more of a help than that!

Executive Summary

How severely is increasing complexity affecting businesses? The Economist Intelligence Unit conducted a global survey of 300 senior executives to ascertain the level of this challenge, as well as the causes and impact of it. This report also looks at what firms are doing to tackle the complexity.

The main findings from the research are as follows.

Doing business has become more complex since the global financial crisis. An overwhelming majority of survey respondents (86%) think that business has become more complex in the past three years. While 28% say doing business has become “substantially” more complex in this period, 58% say complexity has “somewhat” increased. Among sectors, complexity seems to be of greatest concern in technology and telecommunications, with 41% of respondents from this sector flagging it as a clear and present challenge.

Firms are finding it increasingly hard to cope with the rise in complexity. Just over a quarter of respondents (26%) describe their firm as “complex and chaotic” but just one in five say they would have described their firms this way three years ago. Again, the technology sector appears particularly hard-hit, with 41% of respondents from the sector describing their firms as “complex and chaotic”. Given these figures, it is unsurprising that tackling complexity is a priority on senior management’s agenda at nearly one-half of the firms in the survey. It is worrisome, however, that it appears not to be a big priority yet for a vast number of businesses.

The single biggest cause of business complexity is greater expectation on the part of the customer. Whether as an individual or an organisation, the buyer now expects integrated packages of products and services, as well as customised offerings. The second most cited cause of complexity is increased regulation, followed in joint third place by rapid organic growth and operating in multiple jurisdictions. Complexity arising from the advance of globalisation is only eighth on the list of causes.

Complexity is exposing firms to new and more dangerous risks. Complexity has significantly increased the risk exposure of nearly one in five (18%) firms in the survey, and at nearly a quarter (23%) of financial services firms. The majority of firms say complexity affects their ability to change business processes and it hinders the introduction of new products and services. Complexity is also rendering decision-making more difficult at more than a quarter (27%) of the firms represented in the survey. Companies with a three-year decline in earnings before interest, taxes, depreciation, and amortisation (EBITDA) are more likely to be struggling with decision-making than those companies that have not suffered such a decline.

Businesses are focusing on technological solutions to tackle complexity. Simplifying information and communications technology (ICT) systems is the most popular initiative to tackle complexity in business, along with efforts to simplify or consolidate the range of products and services. As a source of complexity, though, technology comes in only at seventh place in the survey.

A majority of firms have an organisational structure that may be adding to complexity. Nearly three in five survey respondents say that their firm’s organisational structure is contributing to an increase in complexity. Almost one-half (47%) say it is difficult to work out who is responsible for what at their company and 39% say there is considerable duplication of effort.

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3 Responses to Economist Intelligence Unit: New complexity research

  1. The sponsors of this research are RBS. I would have hoped that one thing they may have known before the research or learnt from it, is that complex systems are inherently “robust yet fragile”. That is to pursue a strategy that is about “Optimal” or “Lean” is to introduce fragility to the potential detriment of the whole system.

    In which case identifying areas of weakness, where redundancy may be required, would be a good idea to build RESILIENCE?

    So I’m not sure what these job ads tell us about the coherence or wisdom of the RBS strategy:

    RBS is driving a new strategy to rebuild the group to a position of standalone strength, with our Lean practitioners playing a vital role in achieving this goal. Through application of Lean…

    Lean Manager – Edinburgh Salary from £35,000 to £45,000 + generous benefits allowance + individual bonus potential

    Lean Leader – Edinburgh £45,000 to £55,000 + 30% benefits allowance + individual bonus potential

    Answers on a postcard please!!!

  2. Optum says:

    Please do not mix western way of business mentality/culture with Anglo-Saxon / Anglo-American version of business mentality, culture and schooling. American and British academics and business people often do that; which only directly and indirectly proves their self-centricity and culturo-centricity and global eliteness and a kind of über-culture-view-of-the-world. I’ve got news for you people; we people from the rest of the world do not se U.S. or U.K. as world’s business or academic or cultural centers. In fact there are no centers at all in the modern world, i.e. the world is polycentric; centers are almost everywhere, whatever you think about it. So, you’ve been notified about that, and we’ll continue informing you about the view of other “less-elite” and “less-noble” peoples/tribes/nations and cultures as long as it take. Welcome to complexity of the brave new world, where we won’t stand for that kind of patronistic down-talking anymore.

    • Thanks (I think!) for your comment, although I am not sure (1) quite what has prompted such a comment (2) why you feel the article is patronising (3) why you feel I need to learn something from your comments!

      It would be somewhat naive of me (or anyone) to presume to talk about the threats or opportunities as a result of GLOBAL complexity without recognising that the World consists of a great deal more than US/UK. In many ways complexity is better understood outwith UK/US even though it presents a greater threat to many of their largest Corporations and Institutions.

      If you “grievance” is with the content of the EIU report I am sure you will not be alone. I have expressed my own in the article.

      If I am missing something please do let me know…otherwise it is pretty pointless shooting the messenger. Particularly one who is very keen to raise the level of understanding on the subject irrespective of location, history, creed, colour, sexuality, religion, etc!

      David

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