IT environments in large global organizations have a tendency to become increasingly complex as they grow. This can be attributed to fast growth rates, customized needs and adoption of tactical approaches during crunch times. In addition, Mergers & Acquisitions bring in new layers. This is especially true for Consumer Goods industries with data explosion from multiple brands and business units spread across geographies adding to the complexity.
It is, therefore, hardly surprising that CG companies face huge direct cost impact as they end up having 2x - 5x the optimal IT footprint in terms of applications, data centers, processes, etc. The impact of indirect costs is even greater as it reduces agility and speed at which IT organizations can cater to dynamic business requirements.
What are the critical factors in reducing complexity?
A majority of leaders start with Business Process Optimization. Once you rationalize and simplify business processes, the IT systems will automatically get aligned. However, each business unit or geography will always have unique business needs/models and standardization can be driven only up-to a particular point. I sincerely advocate the presence of an IT Complexity Officer to support the Business Process Executive. Jointly, these two should act as enterprise-wide sponsors to make simplicity in business and IT processes a part of the DNA as against a one-time special program. It is important for such an activity to address the entire value chain c from Supply Chain to Marketing.
From an IT perspective, short-term fixes to existing IT systems hurt organizations in the long run and should not be tolerated. Retiring legacy systems and data cleansing should become part of regular hygiene. Measurements and benchmarks on complexity should become part of goals and objectives with clear targets. The digital revolution brings forth three key considerations:
a) Mobility and Cloud are becoming mainstream
b) Emerging markets are the focus of exponential growth
c) Personalized 1:1 marketing is gaining popularity
Consumer Goods companies have to keep in mind that the above trends will continue to add to business complexity and should take proactive measures to architect long term Process and IT roadmaps.
An effective, simple and agile IT organization will be better positioned to support business as CG companies continue to innovate and grow with new brands, new geographies, new acquisitions and new models of engaging with retailers and consumers.