The hidden cost of doing business

Abstract

Purpose

The purpose of this article is to present the findings of a project to study the complexity management activities and strategies of 20 global companies.

Design/methodology/approach

The article is based on a survey of 65 managers of 20 global companies. Interviews with senior management were combined with the study of public and company files.

Findings

Global companies have a tremendous opportunity in making quantum leaps in complexity reduction. We have found that around 25 to 35 percent of costs is complexity‐driven. There are two successful approaches to managing business complexity costs: simplification and reconfiguration.

Research limitations/implications

The study is embedded in qualitative research.

Practical implications

Coping with complexity requires continuous efforts to identify and eliminate complications that add no value. Management has to analyze the company and its environment to flush out the hidden linkages between costs, activities, and the decisions that generated them.

Originality/value

The competitive edge of great global companies is consistent operational effectiveness through effective complexity management. Simplification or reconfiguration to reduce complexity can have a major impact on global competitiveness by simultaneously lowering costs, improving customer benefits and cutting response times.

Citation

Klaas Jagersma, P. (2008), "The hidden cost of doing business", Business Strategy Series, Vol. 9 No. 5, pp. 238-242. https://doi.org/10.1108/17515630810906747