Simplicity as Strategy

One of the primary jobs of every chief executive is to figure out the most effective pathway to growth and profitability. In most cases, this involves developing new products or services, moving into new markets, acquiring or enhancing capabilities, or some other “additive” strategy.  In the past few years however, a handful of CEOs have realized that one of the most powerful ways to grow the firm is not just to add – but also to subtract, consolidate or streamline – in essence to “simplify.”

On the surface, this sounds like a paradoxical strategy. How can you get bigger by doing less? But simplification as a strategy doesn’t actually mean doing less. Rather it means clearing away the clutter and reducing the complexity so that your people can focus on getting the right things done more effectively and therefore produce a far greater return from their efforts. Gary Rodkin of ConAgra Foods, one of the CEOs who has deployed simplicity as a strategy for growth, refers to the process as “fewer, bigger and better” – getting his people to take on fewer projects, but making sure that each one is a high potential idea that is executed extremely well. 

ConAgra’s Simplification for Growth Strategy

For ConAgra, this notion of simplicity as a strategy for growth has been a critical component of the company’s turnaround. When Rodkin became CEO in 2005, ConAgra was a holding company for a hundred separate brands that had been acquired throughout the previous years. But there was no differentiation between the brands, which all competed for marketing and research funds. Furthermore, many of the brands had their own operating infrastructures which not only added to ConAgra’s overall costs, but also made it difficult to pull together comparable financial numbers; and made it virtually impossible to present one voice to major customers such as Kroger or Wal-Mart. As a result, growth was at a standstill.

Faced with this complexity, Rodkin realized that a key to growth would be simplification – of the structure, products, processes and behaviors of the company. To execute against this strategy Rodkin restructured ConAgra into an integrated operating company with enterprise functions (Finance, HR, Legal, Sales, IT, R&D, Marketing, Supply Chain) that supported all of the brands. At the same time, he analyzed and categorized the brands in terms of profitability and growth potential which gave him and his team a basis for selling off low-performing brands (such as meats and cheeses) while either maintaining or investing in others. The combination of the simplified structure and simpler brand portfolio quickly generated savings for the company. Rodkin then reinvested a portion of these savings into high priority programs. He also insisted that his team simplify and streamline the core processes of the company – such as financial reporting, forecasting and new product development – so that the high priority projects could get done faster and with better control. The result is a company that today, while continuing to simplify, has exceeded its numbers while successfully introducing into the marketplace a stream of new, innovative and winning products.

Simplification as a business strategy however is not new. Twenty years ago, Jack Welch focused on “speed, simplicity and self-confidence” as a key strategy for improving GE and getting it ready to compete more effectively in the 21st century. At that time, he realized that convoluted decision-making, inefficient processes and hard-to-understand products would severely constrain GE’s ability to react nimbly and flexibly to a fast-changing environment, and thus would be a significant drag on growth. To counter the complexity that was stifling GE, Welch launched a series of simplification initiatives spanning a ten year period such as Work-Out, process mapping, best practice analysis, six sigma, and e-business. Eventually, simplification became part of the GE mindset, built into everything from performance assessment to management development. Since 2001, CEO Jeffrey Immelt has reinforced the importance of simplification even further by building it into the company’s growth playbook and “imagination” efforts. As Susan Peters, GE’s Chief Learning Officer notes, “The complexity and sheer size of GE forces simplicity: There are so many issues and industries and countries to cover that we’ve got to cut through it.”

Simplification Today – More than Ever

Many senior executives today realize that complexity-reduction is an urgent challenge. They have seen how General Motors collapsed under the weight of too many brands, models, dealers and bureaucratic processes; and they understand that the financial crisis was caused in no small measure by financial products that no one understood. So for them complexity is not just an annoyance – it is a potential differentiator between success and failure.

But dealing with complexity is easier said than done. Today’s business world is even more complex than what Jack Welch had predicted. Managers now are faced with the onslaught of new technologies; global 24/7 communications; industry consolidations; increased regulatory restrictions; security concerns; environmental sensitivity; pricing volatility; and a host of other changes. In the midst of these forces, companies are struggling to keep up. Most senior leaders and middle managers feel that they are working longer and longer hours with less to show for it. They report that more and more people need to be consulted for decisions, more meetings are needed to get alignment, and more information needs to be reviewed before it is clear what to do.

Dealing with all of these issues is like running a marathon with a dozen extra layers of clothing. It’s possible to get to the finish line, but everyone is exhausted and overheated. And before anyone can rest and take some water, a new race begins. 

Unfortunately, running races with this kind of inefficiency is not sustainable. What’s even worse is that the extra effort required to achieve current objectives drives out the time, energy and bandwidth to innovate and think about the future. Therefore if chief executives want to accelerate growth in this complex environment, they have to systematically help their people clear away the weeds that choke out or slow down creativity and productivity. And while this sounds like a simple concept, putting it into practice is not easy. When managers and employees are insecure about their jobs – as many are today – they cling to their busy schedules as a defense mechanism, a way of showing that they are indispensible. While complexity might be exhausting and frustrating, it is also comfortable. And therefore many executives accept it as an inevitable part of modern organizational life.

But it doesn’t have to be this way. If you are a CEO or senior executive, you can do something about unnecessary complexity and make your workplace simpler, more productive, and more satisfying for customers and employees.

If you want to go down this path, here are three simple (but not easy) steps you can take to join CEOs like Rodkin, Welch and Immelt who have made simplicity part of their strategies:

1.      Declare simplicity as a business imperative: Rather than talk about simplicity as a nice-to-have value, position it as a core strategy and a key driver of business success. For example, after consumer ratings and research company Nielsen was taken private by a consortium of equity firms in 2006, new CEO David Calhoun focused the company on becoming “open, integrated and simple” as the strategy for improving operating performance and developing tighter and more collaborative relationships with customers.

2.      Make a few dramatic simplification moves to prove you are serious: Talking about simplicity as a business driver is a good starting point, but it needs to be supported with rapid, decisive and even dramatic action. As mentioned earlier, many people are comfortable with complexity because it makes them feel important and indispensible – so mere encouragement and exhortation will usually not be enough to break long-standing patterns. When Jeffrey Kindler became CEO of Pfizer Pharmaceuticals, he took over a company that was severely hampered by complexity. For example, there were a dozen or more layers between the CEO and front-line people; and there were so many decision councils and committees that very few decisions were being made. Quickly Kindler backed up his talk about simplification with an insistence that there be no more than eight layers between him and first-line employees. He also eliminated a dozen long-standing committees and councils and radically simplified the decision structure. While these steps did not fully simplify the company, they sent a strong signal that simplification was going to be more than just a slogan.

3.   Encourage ongoing simplification by making it an expectation of leadership: Obviously the CEO cannot simplify a company alone. The rest of the executive team, and indeed all managers and employees need to get in the game. Many simplification opportunities are just not visible from the top; and almost all require the engagement of the key people who need to make it happen. That is why the third key action is to provide vehicles, tools, and motivation for broadening participation in simplification – not as a voluntary activity, but as an expected part of the leadership job, just as important as hiring, budgeting and strategic planning. For example, at SEB Bank, a commercial and retail financial services organization based in Stockholm, CEO Annika Falkengren built on her initial simplification steps by creating a company-wide operational excellence program called “The SEB Way.” Through a series of cross functional workshops this program drove standardized, consistent and simplified processes across the company. In the first year alone, more than 40 percent of employees participated and launched 180 specific simplification projects. Most importantly, Falkengren incorporated “One SEB” behaviors into leadership performance reviews as a way of reinforcing progress and making simplification an ongoing expectation.

Ron Ashkenas (ron@rhsa.com) is a managing partner of Robert H. Schaffer & Associates (Stamford, CT.), the author of Simply Effective: How to Cut Through Complexity in Your Organization and Get Things Done (Harvard Business Press, December 2009) and an official blogger for Harvard Business Review’s Blog Network.