Why should simplification be the key focus for the COO?
Identifying organisations’ simplification potential in a complex environment
At Deloitte, we believe that complexity increasingly poses an operational roadblock that could ‘make or break’ an organisation’s future competitiveness if not managed promptly and appropriately. Find out more about this and how your organisation can start tackling this issue.
Businesses are facing increasing complexity on all fronts, posing operational challenges and limiting a company’s success. COOs or executives with similar responsibilities, are best placed to address this threat as holders of levers which can significantly simplify the business and operating models to unlock the full competitive power of an organisation.
Across industries, we observe increasing complexity in our clients’ organisations, often driven by external forces which would benefit from greater simplicity. This may sound paradoxical, but here’s an example: banking clients are becoming more demanding, asking for very specific services with specific attributes, wanting to be protected from risk and to be kept informed about myriad risks and opportunities. On the flip side, the same clients are looking for simple and seamless touchpoints and services provided by the bank. Hence, clients drive complexity, while at the same time demanding simplicity.
We observe the following:
The impact of these forces on an organisation is increasing, manifesting in issues affecting both the top and bottom-line.
At the top-line:
- Highly analogue and non-customer centric products and processes erode an organisation’s competitive position
- Complex system landscapes decrease an organisation’s ability to satisfy customer demands
- Companies with complex organisational structures lack the agility to rapidly respond to market challenges
At the bottom-line:
- Highly analogue and complex products and processes drive operational costs
- Complex system landscapes, setups, interface structures or data usage increase operational and regulatory risks and related costs
- Complexity in organisational setups often creates inefficiencies, leading to increased costs of operations
Having understood the importance of simplicity in today’s business environment, the logical next step is to identify an organisation's simplification potential. This will provide the foundation for the design of the target solution, and should include:
- Inside-out and outside-in assessment of the simplification levers (such as products, processes and systems),
- Comparison against industry and internal best practices
- Enrichment with data and qualitative insights
Examples of major simplification opportunities include:
The following use cases are examples of how clients in different industries were able to unlock much stronger competitive power of the organisation by simplifying the business and operating model:
Life Sciences Industry
A key challenge for life science companies is to identify areas for simplification across the entire value chain. Enhanced speed and effectiveness of the clinical trial processes and maximised margin through the product life cycle are just two prime examples of where simplification can yield beneficial results and an impact that truly matters to the business. Capturing these simplification benefits across the process, product and system landscape will be a key catalyst for the transformation journeys life science companies are currently embarking on.
Government and Public Services Industry
Simplification is a key driver for government and public services organisation to fulfil their main objective to increase the citizens’ quality of life. The focus should first and foremost be on process simplification. Today's often complex, highly analogue, and non-citizen friendly processes can be improved. Doing so often requires limited investments, with no or very limited regulatory impact and can be implemented within a short period of time as the COVID-19 crisis has shown. Thus, process simplification is a fundamental asset for government and public service organisations to increase their operational efficiency whilst increasing citizens' quality of life.
Financial Services Industry
Financial services organisations need to focus on their key front-to-back processes, thinking holistically to identify harmonisation and automation potential throughout their organisation. Firms should also focus on large, complex technology stacks which impede business agility. Applying a “cloud first” strategy, preferring software-as-a-service components to replace legacy applications, and connecting services through APIs in a modular architecture, is a proven approach to simplify operations.
Complexity is a reality in today’s business – as are the benefits of simplifying operations. At the beginning of any simplification initiative is the acknowledgement that every organisation has the potential to simplify. We have the methods and tools to make that potential visible, and we will elaborate further on our approach to simplify in the next articles to come.