The Power of Simplicity

An insurance company with a strong customer intimacy strategy wants to offer personalized cover. Their products and services should be attractive for people of all ages, from different cultural backgrounds, personal life planning goals, financial resources and individual preferences. This can easily lead to thousands of combined forms of cover.

 

In an asset management company, employees have to deal each day with tens of thousands of rules, ranging from country-specific legislation to supranational regulations such as European Union policies. Furthermore, rules change multiple times each year.

 

 ©  cAepsele

© cAepsele

 

Complexity cannot be reduced. Complexity is a natural phenomenon ; it is simply the way the world is, with all its diversity and change. A McKinsey report outlined the business case: ‘If complexity, in all its aspects, is seen as a challenge to be managed and potentially exploited, not as a problem to be eliminated, businesses can generate additional sources of profit and competitive advantage …’

The challenge consists in simplifying complexity.

Ikea is among the top 10 brands in the 2013 Global Brand Simplicity Index compiled by the brand strategy firm Siegel+Gale. This index analyses the impact of simplicity on brand perception. The 2013 edition focused on the relationship between simplicity and employee innovation.

Imagine the degree of complexity of a global brand like Ikea. Behind the scenes highly detailed business operations and millions of data points ensure that the whole organisation with all departments are connected to a same programme.

If some Ikea products may be hard to pronounce, the perception of the brand is clear and the messages are simple. Ikea makes complexity look effortless. All the studies confirm that consumers are more likely to connect with a brand providing simple experiences and straightforward messages.The added value or the benefits to customers are obvious : ‘…Offering easy-to-assemble products at low prices and easy-to-navigate stores, the Swedish company continues building a brand that makes home furniture simple …’.

But the fourth Siegel+Gale annual survey reveals another interesting conclusion. Not only are consumers willing to pay more for simplicity,  employees also find it easier to innovate when the positioning and the purpose of their company are clear.

‘At the end of the day, business leaders who invest in simplicity achieve increased revenue and foster innovation’, says David Srere, co-CEO and chief strategy officer of Siegel+Gale.

 

The Complexity of the Service Sector

The change from an industry- to service-oriented society or knowledge-based service economy started in the early sixties. Today the service industry represents 70% of the GDP in Germany, in Luxembourg it amounts to 87%, Hong Kong leads the list with a quote of 91%.  

In his book ‘The Third Wave’ Alvin Toffler, an American writer and futurist, describes a post-industrial age based on actionable knowledge as a primary resource with a great diversity of lifestyles, flexible and adaptable organisations and quick changes. Information can substitute most of the material resources and will eventually become the main material for workers who are loosely affiliated.

The last decade was marked by an enormous boost in terms of information and telecommunication technologies. The confrontation of the human brain with the process of an increasingly complex, fast and yet abstract network has never been so challenging. The ever-increasing flood of information, increasing time pressure and complicated coordination channels make it more and more difficult to act with certainty. Digitalisation gives us endless possibilities to capture, store, share, transfer, visualise or analyse information.

Despite the scientific value of these achievements, there is a tiny detail missing. The most important function of the human brain: the ability to forget. Discard the superfluous. The ability to distinguish between useful information and redundant information. Filtering important information and presenting it in a structured manner is one of the biggest challenges of the service sector in the 21st century.

The installation of spam filters, the configuration to surpress user comments or advertising on social networking sites are possibilities to manage information. But the exact relevance of information can solely be judged by a human being based on a combination of economic, social, ethical, cultural or other criteria.

 

Simplify Complexity

The most successful companies such as Ikea, McDonalds or Apple share three virtues. They have a highly distinctive core business, they make great efforts to keep their business model as simple as possible and they apply it relentlessly to new opportunities. A strong brand like Ikea is not even limited to its core activity. Now Ikea is partnering with Marriott International, lending its expertise to help create a chain of hip, budget hotels. Good design for everyone, the central promise of the Ikea brand, remains unchanged.

But how can an insurance company or an asset management become more successful?

Insurance and asset management companies are very good examples to illustrate the need for change.  In the course of time the service sectors have diversified  activities to ensure growth. The specialisation in many different disciplines has resulted in people losing sight of the big picture.

Today the extreme complexity of some insurance products makes it difficult for the policyholder to choose on the basis of objective and measurable criteria. Incomprehensible pricing and opaque conditions are not unusual. The advantage for the customer is not clear and ultimately the company risks forfeiting the customer’s trust.

The asset management industry faces extremely complex environments in order to balance risk and regulatory complexity with the expectations of investors, regulators, industry partners and other stakeholders. The surrounding factors are so complicated that innovation is stagnating.

Only one thing is for sure. The more complex products, services and technological gadgets we produce, the more we need to simplify user experiences. Chris Zook and James Allen, the authors of Repeatability, call complexity the ‘silent killer’ of modern business. To avoid it, firms must make a cult of simplicity.

Simplifying complexity means shifting from a control-driven approach towards an approach of empowerment, i.e. enabling your customers to understand exactly what you are doing and what advantages you are offering. That also means providing your internal staff with powerful messages in accordance with clear brand values.