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Conquering Complexity in Your Business
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2 Map and quantify cost impact of complexity: Each product, service, feature, option, etc, affects a host of processes and tasks in ways that are usually invisible unless you map the workflow and collect data on key process factors (speed, quality, delays, nonvalue-add waste, etc) The flow and data on multiple processes are captured in a Complexity Value Stream Map; the data gathered is used to establish baseline PCE measures 3 Create a Value Agenda: The last steps in the process help you evaluate how much PCE is destroyed by each of your offerings at each key step in your value stream, and determine the best options for dealing with the very high or very low consumers of PCE The outcome is a set of specific projects targeted at specific complexity or improvement opportunities, and associated with data-based projections of gains in Economic Profit
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1 Market share can be a good proxy for value share when the market yields high EP%, with good growth rates, low current market share, and an unresponsive set of incumbents 2 Andrew Pierce, Hanna Moukanas, Rick Wise, Brand Portfolio Economics: Harnessing a Group of Brands to Drive Profitable Growth, A Mercer Commentary, 2002 3 The case history was compiled from German sources by William C Zeeb, Jr, a Director for George Group in Geneva, Switzerland His current role includes working with executives to plan and rapidly deploy Lean Six Sigma-based Continuous Improvement Mr Zeeb has trained more than 400 managers in Lean Six Sigma and Conquering Complexity methodologies in both transactional and manufacturing environments in 15 European countries Prior to joining the George Group, he held leadership positions with Delphi Automotive, General Electric, Viterra Energy Services and the Adam Opel AG, where he gathered deep cultural understanding of driving change in various European environments 4 Lorrie Grant, Warehouse stores aren t just for those pinching pennies: Big Three set lures for upscale customers, USA Today, June 20, 2003
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PART II
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Complexity Analysis: Quantifying and Prioritizing Your Complexity Opportunities
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Conquering Complexity in Your Business
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Executive Overview of Complexity Analysis
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Part I of this book laid out the argument that solving complexity problems can help you create enormous shareholder value The question now is how exactly to leverage complexity to gain a larger share of the revenue and Economic Profit (EP) in your industry The stakes are high As the case studies in Part I proved, there s a huge payoff if you tackle the right targets but also a lot of ways to invest resources with little effect if you pick the wrong targets So if ever there was a time when rigor is needed, this is it The purpose of the Complexity Analysis described in the next three chapters is to make the conquest of complexity (and its benefits) available to all competent managers through a well-defined quantitative methodology that supplements and informs business judgment After a lot of research and analysis, we ve developed the following process (also shown in Figure II1): Phase 1: Select Targets The goal is to focus your complexity efforts by identifying business units where there is good reason to suspect that complexity is either hindering EP or could serve to increase it This phase relies on calculating EP and analyzing market trends to evaluate where you have the most value-atstake Phase 2: Map and Quantify the Impact These steps provide the rigorous backbone that is missing from most complexity analyses We ll show you how to create a Complexity Value Stream Map, which depicts how the full variety of your offerings impacts your processes, and how to use the Complexity Equation to quantify this impact Phase 3: Build a Complexity Value Agenda These steps provide the segue from fact to action The steps lead you through a process for using the quantitative information you ve just generated to
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