Waging war on complexity costs

"This is an ambitious book packed with insight and fresh thinking. Separating good from badcomplexity costs is a critical task facing companies today, and the authors provide a compellingroadmap for solving the problem."
Michael B. McCallister, President and CEO, Humana Inc.

" Waging War on Complexity Costs examines an incredibly important and often overlooked aspectof business and organizations in general--regulators and government officials should read thisbook and take notice. Complexity dramatically increases costs and risk of failure. It is like acancer that eats away at efficiency and profitability."
Andy Beal, Chairman and CEO, Beal Bank

"This is by far the best and most useful explanation of how to address complexity in a business. Waging War on Complexity Costs frames the issue in a way that companies can finally tackle theproblem--this book delivers."
Ahmad R. Chatila, CEO, MEMC Electronic Materials Inc.

"This is the first book that really targets organizational complexity in a compelling way, makingthis a must-read for any organization that is looking to distance itself from the competition. Afteryears of cost-cutting, many companies are realizing that they still don't have a discernable costadvantage. This book provides the platform to achieve just that, by attacking the complexity thatbogs them down."
Tom DiDonato, EVP Human Resources, American Eagle Outfitters, Inc.

About the Book:

Complexity costs are the single biggestdeterminant of your company's costcompetitiveness. For the past two decades thepursuit of growth has created massive complexityin processes, product portfolios, andorganizations, adding costs that companiescan ill afford. The only good news is that yourcompetitors may be carrying as much complexityas you are. Learn how to eliminate thiscomplexity, and you can create a tremendouscost advantage over your competition.

In Waging War on Complexity Costs , StephenWilson and Andrei Perumal deliver a powerfuland practical approach for reclaiming yourcost advantage. This executive-level resourcepresents a wealth of insight and new researchto definitively answer key questions such as:

How can I quantify the cost of complexitywithout getting lost in a sea of data? Where are the biggest opportunities forreducing product, process, and organizationalcomplexity, and how can I cut through theinterdependencies that trap these costs? How can I see results quickly by takingtargeted actions against key levers? How do I keep complexity costs at bay? It is not enough to attack bloated product portfolios.Substantive cost improvements requireaddressing the complexity in the underlyingprocesses and organizational structures. WagingWar on Complexity Costs provides a wealth ofrelevant case studies with examples from Kraft,Tesco, Fiat, and the U.S. Navy and highlightsspecific strategies for reducing costs by 15-30%in significant portions of your business.

Tomorrow's consumers are emerging as wellinformedcustomers who know what theywant and the price they're willing to payfor it. Complexity not only drives costs; itcreates a barrier between you and the customer.Declare a war on complexity costs andprepare for profitable growth.

Author Notes

Stephen A. Wilson is managing director of management consultancy Wilson Perumal &Company, Inc. He is coauthor of Conquering Complexity in Your Business . He has an MBA from the Wharton School.
Andrei Perumal is managing director of Wilson Perumal & Company, Inc., and a former officer in the U.S. Navy's Nuclear Power Program.He previously worked at Bain & Company and has an engineering degree from MIT.

About the Authors/Acknowledgments	p. vii
Foreword: Why This, Why Now	p. viii
Part l A Call to Arms: The Imperative for Action
Chapter 1 The Imperative for Waging This War (And the Need for Better Battle Strategies)	p. 3
An Island of Profit in a Sea of Cost	p. 5
Decomplexity Case Study	p. 6
Why Companies Lose the War or Avoid It Altogether	p. 7
The Art of Complexity Warfare	p. 9
The Opportunity: Big gains, with speed	p. 16
Deep Dive#1 - What Winning Looks Like: Cash Flows, Profits, and Performance	p. 19
Chapter 2 The Nature of Complexity (And What It Means for Your Business)	p. 27
The Three Types of Complexity	p. 27
A Three-Dimensional View of Complexity	p. 32
The Geometric Nature of Complexity Costs	p. 33
Implications for Waging the War	p. 36
Preview: Taking out complexity costs	p. 39
Moving forward with a Fuller Understanding	p. 41
Chapter 3 The Rise and Rise of Process and Organizational Complexity	p. 43
The Three Waves of Process Architecture	p. 45
Conclusion	p. 55
Deep Dive≠2 - Assessing Your Company's Cost-Cutting IQ	p. 59
The Cost-Reduction Pitfalls	p. 59
Assessing Your Company's Cost-Cutting Biases	p. 66
Chapter 4 Sizing Up the Prize, Part 1: The Fundamentals of Making the Financial Case	p. 67
Making the Financial Case to Focus the Organization	p. 68
Why Companies Struggle to Size the Ptize	p. 68
Fundamentals for Quantifying the Cost	p. 70
From Fundamentals to Method: An introduction to the triangulation approach to sizing the prize	p. 74
Conclusion	p. 79
Chapter 5 Sizing Up the Prize, Part 2: The Methodology for Quantifying Complexity Costs	p. 81
Step 1 Calculate the lower bound	p. 83
Step 2 Calculate the upper bound	p. 85
Step 3 Pick a stretch target	p. 86
"Sizing the Prize"Example	p. 90
Next: Re-imagine your business	p. 93
What the CEO Needs to Know	p. 93
Part II Know Thine Enemy: The Faces of Complexity and Implications for Battle
Introduction to Part II	p. 96
Deep Dive #3 - The Juice Dilemma: A Case Study on How a Larger Portfolio Can Lead to Smaller Profits	p. 99
Background on Morley Farms	p. 99
The Opportunity	p. 101
The Analysis	p. 102
Impact on Morley Farms	p. 105
Further Insights from Morley Farms	p. 107
Conclusion	p. 109
Chapter 6 Where Complexity Arises: The Product/Process Face	p. 111
Common Symptoms of Product/Process Complexity	p. 113
Major Interactions on the Product/Process Face	p. 114
Key Implications for Battle	p. 126
Recommended High-Value Battle Strategies	p. 128
Conclusion	p. 129
Chapter 7 Where Complexity Hides: The Process/Organization Face	p. 131
Common Symptoms of Process/Organization Complexity	p. 132
Major Interactions on the Process/Organization Face	p. 134
Key Implications for Battle	p. 142
Recommended High-Value Battle Strategies	p. 145
Conclusion	p. 146
Chapter 8 Where Complexity Takes Root: The Organization/Product Face	p. 147
Common Symptoms of Organization/Product Complexity	p. 151
Major Interactions on the Organization/Product Face	p. 153
Key Implications for Battle	p. 157
Recommended High-Value Battle Strategies
Conclusion	p. 160
Summary to Part II	p. 161
Part Ill Battle Strategies to Eliminate Complexity Costs
Introduction to Part III: Taking Ground	p. 166
Developing a Battle Plan	p. 167
Taking Ground against a Difficult Foe	p. 169
Conclusion	p. 170
Chapter 9 Portfolio Optimization (A): What Really Matters	p. 171
Why Traditional Rationalization Efforts Often Fail	p. 173
The Three Factors That Really Matter	p. 176
Conclusion	p. 181
Chapter 10 - Portfolio Optimization (B): SKU Analysis and Selection	p. 183
Understanding Incremental Revenue	p. 183
Understanding Incremental Cost	p. 187
Implications: Categories of SKU removal	p. 194
Creating a Portfolio Optimization Plan	p. 199
Growing Revenue	p. 199
Chapter 11 Network and Footprint Consolidation	p. 203
More Complex than We Need to Be	p. 205
Meeting the Future Halfway	p. 207
Cadbury: Clearer choices, greater focus	p. 211
Conclusion	p. 213
Chapter 12 Component Rationalization and Vendor Consolidation	p. 215
Defining Component Rationalization	p. 216
140 Batteries and 25,000 Forecasts: A case study in component complexity	p. 217
The Benefits of Component Rationalization	p. 218
Getting Bang for the Buck with Component Rationalization	p. 220
Learning the Hard Way: A case study	p. 222
The Big Question: Broad versus targeted	p. 224
Conclusion	p. 227
Chapter 13 Enabling Variety with Lean Processes	p. 229
The Basics of Lean	p. 229
Leveraging Lean for Step-Change Improvement: Six key lessons	p. 232
How Lean Enables Variety	p. 241
Conclusion	p. 244
Chapter 14 Process Segmentation: Minimizing the Effects of Variety	p. 245
Diagnosing Process Segments	p. 247
Approach to Process Segmentation	p. 250
Conclusion	p. 253
Chapter 15 Project Rationalization and Resource Utilization: Getting More Done faster and with Fewer Resources	p. 255
Our Approach: It all starts with fewer projects	p. 256
Doing More, Faster and with Fewer Resources	p. 261
Conclusion	p. 267
Chapter 16 Dynamic Operations: Optimizing Complexity Trade-Offs	p. 269
Case: RME Pharma, Inc	p. 271
Step 1 Recognize the situation	p. 272
Step 2 Quantify the relationships	p. 277
Step 3 Optimize the system for the situation at hand	p. 280
Recap of RME Pharma's Experience	p. 283
Moving Forward	p. 284
The Conundrum: Why do many companies struggle with managing complex systems?	p. 285
Part IV Defense Strategies to Keep Complexity Costs at Bay
Introduction to Part IV Building the Capability to Keep Bad Costs Out	p. 288
Deep Dive #4 - A Corporate Complexity Metric: Tracking Progress at the Macro Level	p. 293
Conclusion	p. 294
Chapter 17 Curbing Product and Service Complexity	p. 295
Roles of a Chief Complexity Officer	p. 295
CCO Role 1: Managing the level of complexity in the business	p. 296
CCO Role 2: Building the organizational capabilities required to manage complexity	p. 303
Conclusion	p. 304
Chapter 18 The Lean Operating Model: Creating a Structural Barrier to Process and Organizational Complexity	p. 307
The Seven Steps to Developing a Lean Operating Model	p. 310
The U.S. Navy's Operating Model	p. 315
Why ERP Deployments Go Wrong and the Need for Lean Operating Models	p. 317
Case Study: Winning the retail wars with the Tesco Operating Model	p. 319
The Relentless Pursuit of Perfection	p. 321
Appendices	p. 323
Index	p. 337

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Table of Contents