Complexity management is a business methodology that deals with the analysis and optimization of complexity in enterprises. Effective complexity management is based on four pillars: alignment with the overall strategy of the company, transparency over all costs and benefits of complexity, identifying the optimization benefits, related measures and managing the trade-offs between parts of the total value chain (the totality of all the company's activities), and sustainable infrastructure such as IT tools, incentives and processes.
Complexity management has recently been enabled by new technology, leading to detailed analysis and simulation of complexity, optimization measures, and their effects down the entire value chain.
Complexity appears in the following fields:
- Product portfolio: number and type of products, features and services sold to the customer base (e.g. SKUs)
- Markets/segments: number and type of market segments in the respective countries/regions served
- Customer portfolio: number and variety of all customers served (including customer accounts and ship-to customers)
- Material/components: Variety of raw materials, components and services used in value generation
- IT systems: Variety and type of systems and applications
- Organization: Company organization, structures and governance
- Processes: Number and type of processes in the enterprise
- Production/Supply chain: Production plants and network, manufacturing processes, asset base, distribution
- Technologies: R&D platforms and project portfolio and product technologies involved
Complexity in enterprises is driven by:
- Market volatility: changing market conditions like raw material supply and sales volumes drive business process complexity
- Fragmented customer demands drive product portfolio and feature complexity
- Globalization drives complexity of served markets and company locations
- Mergers & acquisitions drive complexity in all fields
- Silo-oriented cultures drive complexity in organization, IT systems and business processes
- Increasing customer pressure drives complexity in product portfolio and features
