IT StrategyRaj Sheelvant’s blog on harnessing Information Technology to create and sustain competitive advantage for the businesses

Managing Complexity due to Globalization

Globalization, a process that is still going on, has lowered the barrier for large organizations to expand and hire the right resources irrespective of their location. The employees and the customers are now culturally diverse and are challenging the ‘ethno centric’ corporate culture. Due to these new emerging realities the complexity and unpredictability for IT development and the implementation has increased exponentially.

Ashby’s law of requisite variety, states that the internal complexity of an organization should match the complexity of the external environment. Large Global Organizations seem to have taken Ashby’s law to their heart and have instituted overly complex business processes and well as complex hierarchal and matrix organizational structure. The downside of adding layers of complexity to an organization is that it slows down the process of decision making. Everyone in the organization wants to do the right thing and more resources are spent to systematize analysis process that aids decision making. These check and balances create an organization culture that penalizes ‘off the cuff risk taking mentality’. Large organizations get muddled in ‘analysis paralyses’ and are not willing to take quick decisions. Hence organizations become slower as they become global.  

Globalization is a double edged sword. Accelerated globalization has lowered the barriers to entry and new competitors emerge at a faster rate. Keeping track of new and emerging competitors by the established companies is becoming an impossible task. Just a few years back, none of the motor companies in Detroit or in Japan would have anticipated a competition from India. Tata Motor Company is that company. It is in an advanced negotiation phase with Ford Motor Company to buy beleaguered Land Rover and Jaguar arm from them. Tata also recently released world’s cheapest car. Because of accelerated competition due to globalization organization cannot afford to move at a slower pace. Their products and priorities should be constantly shifting to take advantage of emerging trends and customer preferences just to survive.

So, even though Globalization magnifies complexity, the global organization cannot deal with that complexity by creating more complexity within. That will slow them down. The managers and executive need to go against the conventional wisdom of Ashby’s law and simplify business process and simplify decision making processes. Granted some level of complexity is required. I am not disputing Ashby’s law is flawed, but the focus should not be to overly complicate everything. The new focus by the organization should be on Simplicity – Problems once identified should be attacked directly.

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Sunday, January 13th, 2008 at 10:34 pm and is filed under Project Management, Globalization, IT Management. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.