Complexity Loves Company

Business complexity is double-edged. It can keep competition at bay by discouraging new entrants but it can also act as a scale blocker frustrating your attempts to streamline your operations and build leverage within your business. 

Complexity can creep into your business from any angle and you only have so much control over it. It can be dictated by the industry or other systemic forces and your ability to simplify it may require a scale that is unachievable. 

From my experience, the complexity of your customer acquisition/sales funnel will match the complexity of your product/service offering which will ultimately determine your operational complexity. A simpler way of stating it would be – you can’t have a complex sales funnel for a simple product; you can’t have a simple sales funnel for a complex product. It’s a chicken-and-egg problem for sure.

Complexity is defined differently depending on the operational area. In the sales/customer acquisition funnel, complexity can mean:

1. Multiple decision makers – The more voices that need to be heard to approve of a purchase will increase the LOE to align around action.
2. Varying entry points of engagement via sales channel – Different customer journeys based on distribution model (brokers, reps, dealers, integrators etc) – especially relevant for a wholesale business model. 
3. Sales process duration – Longer cycles create more opportunity for process instability (ie main players move on, business needs change, customer economic fortunes change etc) 
4. High LOE on pre-sale activity – As a part of longer sales process companies may be required to do a lot of heavy lifting before the customer signs the deal, creating cost and resource issues ahead of revenue.

This is usually paired with a complex product/service offering. 

1. Large install/training effort – Indicative of high cost and potential for operational disruption if the planning phase is under invested.
2. Migration from previous solution – Seamless hand-off requires planning and process changes to adopt offering.
3. Highly configurable offering – With so many options, the paradox of choice comes into play slowing slowing the sales process down and simultaneously adding internal overhead to support (pricing, sales training, marketing, support) so many different product options. 
4. Opaque pricing – Pricing mechanisms that require human calculation/intervention eliminate the ability for customers to self-serve.

The common connection between both the sales and product complexity is the human intervention needed to navigate the work on a case-by-case basis. The wide variance in inputs and outputs requires a sorting process that doesn’t lend itself to deterministic logic and linear process. Heavy human intervention is required to fill gaps in non-structured workflows in the form of communication, contextual adaptation and ability to react to unpredictable responses. In most cases, this friction blocks scaling efforts and compresses margin expansion.

In the face of these sales and product realities, companies can either alter their offering or focus on optimizing discrete parts of the business operations to claw back speed and profit margins. The latter will likely lead to gains at the margins of the business but will take dedicated planning and execution; the former will entail taking on revenue and market risk. In these situations, companies will need to soul search to determine what they want to be going forward and act accordingly with the goal of more streamlined operations regardless of the direction they chose.

The Goldilocks opportunity arises in a scenario where the intricacy of your industry or product doesn’t overwhelm your operational acumen—it’s complex enough to deter those without specialized knowledge, yet not so convoluted that savvy entrepreneurs can’t identify and capitalize on the leverage points. 

It’s up to individuals (and their companies) to understand what’s possible.