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Increasing Complexity

Each of the technological, global, demographic, and economic trends reviewed has contributed to this sense of a new normal that seems to permeate every aspect of our lives. We seem to be at a tipping point within each of these trends that is fundamentally different than a normal extrapolation. What is also different is the greater interdependency of these trends and the resulting increase in complexity. Increasing complexity is a fact of life in the new normal, as shown in Table 1.5. It characterizes the world you live in, the jobs you perform, your relationships, and the decisions you make. You manage complexity all the time, even if you are unaware of doing so. You communicate with multiple sources of technology, pay your bills electronically, install software to protect your identity and computers, and shop online to avoid traffic jams. You are a master of multitasking.

Table 1.5 Increasing Complexity

Greater interdependencies

More data, more information, more knowledge

Faster and faster response times

More intangibles

Less predictability

Complexity also enriches your life. Pursuing an education, advancing in your career, and raising a family all increase complexity in positive ways. Being part of a global community increases complexity in both positive and negative ways. Living and working with diverse people enriches your life.

In a study conducted by PWC, 41 percent of the global CEOs that were surveyed agree strongly that complexity is an inevitable byproduct of doing business today (PWC, 2006). Furthermore, 77 percent of these CEOs noted that the level of complexity in their organizations is higher than it was 3 years ago. The challenges of managing global businesses were noted as contributing factors of business complexity. Entering new markets, meeting customers’ needs, and developing new products and services that result from globalizing add layers of complexity that must be managed if the benefits of globalization are to be realized. Respondents cited overregulation as the chief challenge of globalization (64 percent), followed by trade barriers/protectionism (63 percent), and social issues (56 percent). Surprisingly, terrorism and the antiglobalization movement, two topics that dominate media headlines, were near the bottom of the list of perceived challenges at 48 and 21 percent, respectively. Other chief causes of increasing complexity were extending operations to new territories, forming strategic alliances, and outsourcing functions to third parties.

The capability to effectively manage complexity is an important strategic need for many organizations. The CEOs surveyed by PWC ranked employing highly capable people as the single most important way for managing complexity followed by effective communication. Other factors ranked highly included the ability to identify activities that are creating value, the ability to identify activities that are destroying value, the alignment of IT with business processes, the ability to measure complexity, and having a corporate-wide framework for managing complexity.

What’s amazing is this PWC survey was in 2006. Predicting that the level of complexity is increasing was quite accurate. In the following years, the world experienced a financial collapse that resulted in a global recession. There has been the sovereign debt and banking crisis that swept across Europe that is increasing the probability of another recession. There has been a series of political upheavals throughout the resource-rich Middle East, and there is now a fear of slowing growth and structural challenges in the once hot economies of China, India, and Brazil.

According to the CEOs who responded to the 2012 edition of “The Conference Board CEO Challenge” survey, today’s business environment is characterized by the race to innovate, the war for talent, “black swans,” bad debts, the hunt for new markets, and increasing regulations and oversight. When you add to this the need for speed, an overwhelming flow of information and data (not all of it reliable), along with increased risk and uncertainty, the overall leadership challenge facing CEOs is managing complexity (Mitchell et al., 2012). The huge disparities of economic growth, the growing skills gap in many regions, and the peculiarities of regional cultures, customers, and government policies mean that organizations around the world face unique challenges that reflect the business realities they face both locally and globally.

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