Half-way through his briefing to us as we started a new project, the CEO brought beautiful and brutal focus in three words. He spoke deliberately: “Complexity adds cost”. In less than two seconds, he’d not only summed up the Board’s frustration with the drift they’d found in the business, but also set the expectations and the tone of our engagement.
We met his three words with two of our own. “Strategic ambiguity” was our summary of what we’d discovered after a couple of months’ research in and around the full scope of the business. This kind of organisational complexity is rarely deliberate or designed: it accumulates. I’ve come to think that it emerges when leadership teams lose focus on what really matters. That creates fragmentation and friction, it loses momentum and makes things harder than they need to be.
It’s a problem I’ve seen in M&A situations, once the initial buzz from the deal has subsided, but it is also a constant risk for organisations at any stage of their lives.
This client CEO had come into a situation in which diverging cultures had evolved, with internal competition for attention and budgets. The business was getting in its own way, mistaking its own priorities for its customers’, and reinventing the wheel unnecessarily.
Our recommendations were all about clarity and simplification. The decisions the leadership team committed to were difficult, but not complicated.
The overarching strategy was to minimise the number of brands across the organisation, and to unify all operations under one global entity.
Even when one of those brands was leader in its home market, they took the broader and longer-term view (which actually helped them a few months later, when the local No 2 and No 3 brands announced a merger – suddenly, the strength of one global brand became even more valuable).
Where they had been offering over 400 SKUs to their markets – often using the word ‘brand’ to describe nothing more than a technical variation – they re-organised into 20 clearly-defined product groups.
Where they had been operating as four sales organisations within one region, they decided that “we can’t cross a canyon in two steps” so committed to integrating the four into one in a single move (and dealt with all the HR, team roles and egos in doing so).
The result? After an analyst’s briefing, one investor wrote they would mark the stock as a “buy – the new brand strategy will make this a far more efficient business.”
And they were right. In all markets, the client’s performance strengthened. In all stakeholder research, their reputation grew. And yes, they cut costs enormously while increasing profits.
But what stays with me isn’t simply the financial outcome, it’s those three words: complexity adds cost.
And it’s another organisation I’ve worked with showing the value of coherence.