John Mariotti on Conquering the Complexity Crisis

Running Time: 9 minutes 30 seconds  

Canadian Management Centre is pleased to present the American Management Associations strategic planning podcast Conquering the Complexity Crisis with special guest John Mariotti.

Many companies today are in crisis. In the quest to grow their business in flat or declining markets,many companieshave created dozens of new products and services to increase their customer, vendor, and marketplace relationships. But even as top-line revenues go up, this rising tide of complexity is drowning bottom-line profits.

We are in an era when everyone is seeking growth. The problem is that most markets that people are trying to grow in are growing slowly or not at all. This means that there is a proliferation of everything, so that everyone tries to sell to everyone everything in every place. In the process, they create more variety and complexity without a strategic focus. They might get more sales, but less profit.

As complexity drowns your organization in work and the economy takes a downturn, you look for ways to cut your organization and if you dont do it correctly, you take an overworked, underwater organization and make it worse.

As businesses diversify and become more complex, they often lose sight of their true costs. So, top-line profits go up, but overall profits go down as you have more hidden costs then you might realize. Sales might go up, but the added costs also increase, so for example, you may now be selling 14 more different kinds of your product, but you may not be making 14 times the profit as you have different expenses added into these new variances. And in addition, you may be taking sales away from one of your products, as people buy your new product. You arent increasing your overall sales volume, even though you have additional costs.

You can use complexity to your advantage, by creating niches in certain markets. By diversifying your product, but regionalizing it, you have complexity without over saturating the market.

The way you gain competitive advantage is through clarity of focus of what your customers needs are, what the markets needs are and what youre good at. Studying complexity reveals what youre good at, focus on why youre customers are buying from you.

Leadership is the most important aspect in dealing with complexity, and with business in general. The role of a leader is to create a healthy dissatisfaction with the current situation and a clear understanding of it. The second role for a leader is to create a shared vision of a new and better situation and the third is to create an environment where people become motivated to move from where it is now (dissatisfied) to the new and better situation.

John L. Mariotti is president and founder of the Enterprise Group, a coalition of executive advisors. As the former president of Rubbermaid Office Products Group, he led a multinational group of nine divisions in North America, Europe, Asia, and Australia. Hes also a former management consultant and contributing editor for Industry Week magazine. In his book The Complexity Crisis, management consultant John L. Mariotti looks at how companies can truly evaluate their cost and management systems in order to clear away complexityand conquer the competition.