The Simple Way Forward

In his Thinkers50 interview, Bain’s Chris Zook offered a potent call for simplicity.

There is a keen theme that runs throughout your work of simplicity and the need to run organizations simply and powerfully.

Yes, when we began the work on Repeatability, it actually began with the juxtaposition of two apparently opposing pieces of data. One piece of data is that right now, only 9 percent of companies in the world, on average, achieve even a modest level of sustained and profitable growth in a decade, defined as 5.5 percent revenue and profit growth and earning their cost of capital. Only one in ten, and yet the reality is about 100 percent of businesses aspire to that. Yet, when we went out and we asked a sample of 377 executives why is that, what were the barriers to achieving your goals, only 15 percent said it was an inadequate set of opportunities or dynamics, new technologies, growing markets outside, and 85 percent cited overwhelmingly their main reason – internal factors usually relating to complexity. And the complexity so often slowed companies’ ability to decide, with immensely complex decision processes, very often distorted their ability to learn from the front line because of so many layers and doing things differently in many parts of the organization. It creates for more fatigued organizations and it reduces the probability that everyone in the company can really understand what the mission is and what it’s about.

And so the tagline of the most recent wave of work was complexity has become the silent killer of profitable growth. And as its counter, the three design principles of strategies that we felt avoided that are strategies that at their essence are simpler, are easier to see how they are wired to the front line and are strategies that the whole company, like in let’s say IKEA would be an example, it just jumps out at you. What is unique or special about IKEA or Singapore Airlines? It’s just obvious right away what they stand for and are trying to be the best at. So, yes, there’s this premium on simpler strategies with much simpler forms of differentiation, in a world where speed is increasing and complexity is becoming a silent killer.

How do companies like Apple and IKEA stay fresh? How do they stay close to their core?

I think the question you ask, particularly when you get into technology businesses that have major waves of new technology shifts, how to stay ahead of the curve and stay differentiated I think is one of the most difficult problems in business.

You mentioned Apple. I think that’s a very interesting example, because, of course, Apple’s first real success was the iPod and taking away the music market from Sony. Sony was an immensely complex bureaucracy, very slow-moving, far too many SKUs and multiple sub-brands, and although they had their Walkman and were really quite iconic in that space, they were relatively slow to respond to Apple, who took the whole market so quickly. But alongside that, I think it’s so interesting that the very first thing Steve Jobs did when he returned was to simplify the business and move down to four product lines, simplify the R&D agenda to a very small number of projects, particularly featuring the iPod, and actually reducing even the number of departments in the organization and cutting to 60 SKUs – stock-keeping units, products. So that on Monday morning, they could lay them out all on a table.

So I think it’s such an interesting juxtaposition of complexity with a return to simplicity. But the simpler you are, the easier it is to focus on being differentiated. And as complexity occurs, resources become spread, confusion sets in and you begin to lose the real sharpness you need to have to be unique.

You could say that managers are addicted to complexity, they almost have a vested interest in making things more complicated, and leaders have a vested interest in simplicity.

I think that’s right. Founders have a vested interest and almost an innate intuition for the power of simplicity. True leaders, who often are the great founders, have a strong interest in simplicity. We interviewed 50 CEOs and asked how has your job changed and how do you feel these days? And they said, my world is moving faster, the external world is much more complex. Simplicity of my internal world is more important, and yet managing it is the greatest challenge I have. Some of them sounded like Atlas with the world on their shoulders, as the only people in the organization who really had, not only the power, but the incentive to simplify.

Unmanaged, companies turn into bureaucracies and complex matrix structures, with separate strategic plans for every little miniature organization, product, geography, many of them not totally consistent, and committees at every single one of the nodes debating the coordination between one element and the other. Whereas the original founder company with one customer and one product and one founder is the essence of simplicity, and I think the matrix organization is one of man’s most, or humankind’s most masterful ways to magnify unnecessary complexity.