Strategic Simplification

Strategic Simplification is our core approach to boost the efficiency of organizations, be they active in the public or in the private sector.

The essence - and the overall objective - is to achieve Pareto efficiency at creating customer value. This, in turns, translates itself into Pareto efficiency at creating shareholder value over a "long enough" period or, for public institutions, into Pareto efficiency at creating social value.

Economists refer to an economic situation as Pareto efficient if there is no way to make one consumer better off without making some other consumer worse off. This is tantamount to a situation where there is no way to make anyone better off.

Now, transpose this [rather theoretical] economic concept to a public or to a commercial organization. All organizations have but limited resources and numerous activities and projects competing for those scarce resources. The flexibility that they have comes from: 

The overall efficiency that they achieve is therefore a combination of:

What comes inevitably into the picture while optimizing those various types of efficiencies is the Pareto law that states that 80% of the potential value is achieved with 20% of the effort, and that one can spend the remaining 80% of the effort for relatively little return. This law distinguishes the vital few (the 20 % that contributes to the 80 % results) from the trivial many (the 80 % that contributes to the 20 % results). 

Targeting Pareto efficiency inevitably calls for an allocation of the organization's scarce resources on the vital few and a pruning - or a reallocation - of the resources off the trivial many. 

Strategic simplification optimizes the "customer value/price" ratio of a product or a service by concentrating on the vital few features required thereby increasing its attractiveness for the bulk of the targeted market.

Interestingly, a fundamental theorem of economics states that  competitive equilibrium is reached for Pareto-optimal allocation. This requires achieving optimality in: 

Competitive equilibrium maximizes the ratio "value/price" for the entire consumption market. Strategic simplification therefore contributes to align micro-economic and macro-economic efficiency objectives.

Caveat

The 80 - 20 Pareto law is not a justification to compromise with quality. It does not state that the production output needs to be only "80 % good". On the contrary, the whole purpose is to make resources do less but do it better and for the right market segment. Customers are much more sensitive to quality breaches than to lack of functional compliance.

The origin and genesis of our approach are presented so as to make it less of a consulting buzzword and more of what it actually is : the natural outcome of numerous and diversified consulting engagements cast in a structured mold.

The heuristics of strategic simplification is fleshed out in a attempt to make it a living concept, easily understandable without having to go through comprehensive theoretical explanations.

Further insights into the Pareto "skew" are developed together with their actual translation into real-life business figures.

A more theoretical insight into strategic simplification shows how to achieve actual business gains by optimizing the Pareto efficiency.

A few examples are provided in order to show the translation of those consulting concepts into real life business. The counterexamples also provided add more relief to the practical value of strategic simplification.

Do not hesitate to contact us if you believe that strategic simplification can be of any relevance to your organization (which undoubtedly is but you need to be convinced of that in the first place).

Ó IT Cortex