“Numbers written on restaurant bills within the confines of restaurants do not follow the same mathematical laws as numbers written on any other pieces of paper in any other parts of the Universe. This single fact took the scientific world by storm.” Douglas Adams. The Urban Dictionary has more of this superb stuff.
Humans have a natural propensity for complexity (unless they are hard at it on the frontline, like your, fighting the good fight, self).
Sometimes complexity is a deliberate strategy of big businesses, for example banks, electricity and telco retailers but usually complexity comes from rules piled on top of other, sometimes conflicting, rules to try to control specific events that usually, unfairly, burden the rest of us.
Employment law is a great example of both. Not everyone understands that Fair Work don’t make the rules, they are charged with administering them. Employment law and awards are a nightmare for SMEs, it’s definitely an economy of scale that unfairly favours big business.
There are two times your business shouldn’t use complexity, when you are dealing with people outside your organisation, and when you are dealing with people within it (to paraphrase Mark Twain). Leave it to the big boys.
That leaves you with the problem of how to deal with complexity forced on you.
When it’s your customers trying to enforce complexity there is a fair chance that your margins will be the casualty; telcos don’t really want to reduce your phone bill when they call you. Make sure you know how much each service, in each of your revenue streams, costs to deliver.
A recruitment business I know stopped providing contractors to government and not just increased their net profit, they increased their overall gross profit – by simply stopping some work. They were losing money on every government contractor. It was a very big chunk of money, and they found the problem by deep diving into their margins. Think of the extra resources they now have to chase better business.
I’m not saying that all government, or large corporate, work is unprofitable, just make sure you get your numbers right.
When complexity is used as a strategy by your suppliers, go look for an honest one.
When you are forced to deal with complex regulations, always, always, get it done by a specialist. Don’t do your own tax, surveying, quality audits, dentistry or, these days, payroll.
Tax and payroll are excellent examples of extremely complex and constantly changing rules. Talk to a tax expert and most will tell you that they are worn down by it all; feel overworked and under appreciated. They are the experts, why on earth would you do it in-house.
Most people think using specialists is just for overheads like insurance renewals or legal help but it can be equally important as part of your service delivery process. The motor industry are brilliant at this. Why would they build their own antilock brakes and suspension control electronics when they are so complex, fast changing and expensive. They leave it to the experts and their costs, especially in the long run, are lower.
Car manufacturers find it very difficult to estimate demand, models could flop or fly. The latest Ford Bronco looks like having an 18 month waiting list. Nissan Cube, not so hot. The big car makers are experts at matching variable sales with variable direct costs. You should too.
It doesn’t look like the big market ups and downs of late will be behind us anytime soon. Lock in some flexibility, reduce your fixed costs, and your risk. Stop trying to do it all. Embrace a simpler life. Go to dinner (if you can).