The Second S - Simplify
Last week, we discussed the importance of doing due diligence through corporate, business, and product strategy and putting together a comprehensive business plan before starting to deliver results. Now, you are probably thinking about scaling up your company as soon and sustainably as possible. Before doing so, however, have you considered that you might be scaling up your problems along with your business? Because that is the inevitable outcome if you don’t Simplify first. You hire people to fix the issues, add band-aid solutions, buy software platforms to add more complexity and interoperability, and in the end, you get held hostage as changing them in the future costs you even more.
Simplicity is essential to achieving and sustaining real success, and many executives miss it because they believe time is money and want to keep moving forward. They don’t have time to “deal with it” or think it’ll be somebody else’s problem in the future.
Here’s the antidote to break this perpetual pattern:
Simplify your product
You might have experienced being in a restaurant with over 300 menu items. Reading through the menu, choosing what you want becomes a daunting task rather than a pleasure. How would you like to create that level of complexity for your internal and external customers?
Remember, the most appreciated products are designed around a few substantial benefits rather than a boatload of features that serve little to nothing but lessen the core value proposition. Once you accept that you can’t make 100% of people happy, your focus can move to delight 80%-90% of your target segment. Remove the unnecessary features. Instead, focus on real value-added benefits without compromising quality, form, or function. Let your message become more targeted, concise, and explicit.
Simplifying products also help you reduce costs since you use fewer parts and variations. This means less risk of failure as well. Your buying power also improves because of the economies of scale.
Kill the noise! I had a client who works with 16,000 suppliers around the globe. They didn’t need 15,000 of them. Keeping old SKUs alive for a little more revenue or to keep all clients happy is a common mistake many sales and engineering-driven companies make. Decide where you draw the line. My practical suggestion is cutting off the long tail that contributes 10% of the revenues after you lay out the Pareto. You can be more aggressive and do so for the 20% if the tail length is substantial. Otherwise, you’re locking your engineering resources and overburdening your operations, manufacturing, supply chain, quality control, marketing, and sales teams, which are dealing with the noise on a daily basis. Many of my clients suffer from high operating expenses that constrain their healthy growth and negatively impact their EBITDA.
Example from the past-- As part of the product simplification process, we introduced modularity (minimally viable product), where the engineering team could use the same electronic components and modules with different casings to commercialize variations of the same product that would address the needs of various market segments. We EOL (End of Life) 23% of SKUs within months. The revenues increased by showing the value proposition more clearly. The margins improved from 11% and stabilized at 29% by reducing the cost of internal parts due to economies of scale, lowered returns by fewer failing parts, and tighter quality control processes over fewer SKUs.
Simplify your business process and workflow
Simplifying business processes and workflow is complicated since achieving such a goal requires a conscious effort from people at all levels. It’s challenging for those who’ve been performing their task in a particular fashion for many years. Although possible, patterns and habits developed over the years are difficult to break.
The first step to simplifying business processes and workflow is stating every step of the current business process and workflow. I usually use Visio to visualize the end-to-end process and follow the checklist:
You now have a clear visibility of your end-to-end business flow. You can then decide the best time to transition to the improved version. My philosophy is there is never a better time than now. The change will be painful regardless. One significant advantage of doing it earlier is it’ll make your lives easier and faster; it’ll cost you less now, so you can start reaping the benefits. Having said all that, take whatever precautions are necessary to reduce the impact caused by interruptions to your business.
Example from the past—As part of our client's business workflow simplification process, we reduced the product concept-to-launch period from 26 weeks to 16 weeks. The impact of these extra 10 weeks continuously reduced their development cost per project (margin impact), increased their revenues since they could take more projects using the same number of resources (revenue and OPEX impact), and increased business turnover year after year (EBITDA impact).
Simplify your governance
You have already done the groundwork of governance by determining KPIs (Key Performance Indicators), setting RACI (Responsible, Accountable, Consulted, Informed), and clearly defining R&R (Roles and Responsibilities) during the Strategize step. What you need to add now is how to ease and streamline the decision-making process without unnecessary or no-value-add red tape. The key questions you need to ask yourself:
Tony Robbins has a great saying, “Energy Flows Where Focus Goes.” Your job here is to bring focus governance simplification for healthy and sustainable growth while encouraging inclusiveness, better communication among cross-functional teams and ranks, rewarding innovation and ideas for positive change for overall improvement.
A final note on Simplification – Do it at every opportunity as part of your continuous improvement.
Reach us if you want support and expedite the results.
Additional Reading for this section
Simplify: How the Best Business in the World Succeed by Richard Koch and Greg Lockwood
The Basics of Process Mapping by Robert Damelio
The Basics of Process Improvement by Tristan Boutros