Mick James, Top-Consultant.com’s management consultancy columnist, talks to Stephen Wilson of consultants Wilson Perumal, who says 80 per cent of CEOs now say that complexity has outstripped their ability to manage it.
Complexity itself has become the problem
It’s not easy to detect paradigm shifts—as a columnist, it’s best to claim to detect as many as possible and quietly bury your failures—but I would definitely say I’m hearing a definite rumble around the notion of complexity. It’s one of those pattern/background shifts—more and more people seem to be coming to a realisation that it’s not so much that their problems are complex, but that their problem is complexity.
In fact, according to Stephen Wilson of consultants Wilson Perumal, 80 per cent of CEOs now say that complexity has outstripped their ability to manage it. But the very factors that have driven complexity—such as increased organisational size and diversity—have undermined people’s ability to deal with it.
“You get a lot of smart people making good decision independently without thinking about how the whole thing fits together,” he says. “So, for example, you get a bias towards product proliferation, because the benefits are local, while the costs are distributed.”
Consultants can exacerbate this: “Because of their size and scale, consultancy firms have started to echo their clients, so they have supply chain practices, procurement practices, because they understand the needs of the technical functional expert,” says Wilson.
By focusing separately on functional areas, or separating strategy and operations, companies completely miss the interactions between those areas that are driving complexity.
“We try to deal with the issues that straddle operations and strategy,” says Wilson. “We focus on what’s the greatest requirement to win in the marketplace. The luxury that we have is that we can focus on the performance of the company, and retain our status as honest brokers, because we understand how the pieces of the business fit together.”
Taking a “systems” view helps clients understand where cost and risk lies in their business: “There are fixed costs and variable costs, but also complexity costs,” he says. “The fixed variable paradigm permeates a lot of thinking, but complexity costs behave very differently.”
At the same time, complexity also affects an organisation’s ability to react and change: “It’s very frustrating if you are trying to move a particular lever in the business and that depends on two or three other things happening,” he says. “It’s like a Japanese puzzle box, where several concurrent actions are required.”
What is important is to be aware of the trade-offs that are involved in any decision: “You can’t say it’s just about simplicity—it’s about how you manage complexity,” says Wilson. “You can compare it to innovation: the ability to manage complexity as a formal process is a capability that companies need to develop.”
Wilson says that he had initially thought that this approach would appeal most to “producty” type businesses where these types of trade-offs are more obvious. But he says that while FMCG (fast moving consumer goods) and retail businesses have indeed embraced the issue, it has also been taken up by the energy sector.
“If you have an extremely regulatory environment, then there’s huge value in having clarity about what that demands of the organisation,” he says. “It’s not just about understanding a company from a complex system perspective, but also the economy behind it, so, for example, we are now having some interesting conversations with healthcare providers.”
Although Wilson Perumal is still quite small, it is growing rapidly. In the last 18 months, it has grown to 25 worldwide, and is looking to build up its UK presence from two to 10 fee earners.
“We want to build out here in a similar way to the US, about one person a month,” says Wilson. “We want to grow the firm and grow the culture carefully; we only bring in about one out of every hundred people who apply.”
Nevertheless, the firm already boasts a remarkably varied portfolio of people: “We’ve brought in people who have experience in other top strategy environments, people who’ve been in industry programmes who have a very pragmatic view of the world and also people from military programmes who’ve worked on very complex technical projects,” he says. “We look for folk who are creative thinkers and who have an entrepreneurial flair.”
Wilson says that while complexity is beginning to appear on other consultancies’ agendas, they have a lot of catching up to do intellectually (he is already the co-author of a couple of books on the subject) and there are distinct advantages in being small.
“We don’t have to be anywhere, and we don’t have to convince everyone on this,” he says. “Being a small firm means we don’t have a vested interest to defend, and we can say different things because we believe they are true.”
All views expressed in this article are those of Mick James and do not necessarily reflect the views of Top-Consultant.com and Consultant-News.com.
Contact Mick with your views or suggestions at: firstname.lastname@example.org.