Complexity has become a defining feature of the operating environment for New Zealand businesses. Rising costs, labour constraints, geopolitical uncertainty and changing customer expectations have added new pressures, all while businesses are also managing more channels, fulfilment options and technology.
Eric Clark, CEO of Manhattan Associates, believes complexity is becoming a permanent part of the operating environment. Clark discusses why that can create opportunity, what other industries can learn from retail, and how technology and AI can help businesses manage it.
NZ Businesses have dealt with considerable disruption in recent years. Why do you see complexity as a more permanent feature of the business environment rather than something that will ease over time?
Today businesses are managing numerous competing pressures all at the same time. Supply chains are more interconnected, customers expect more choice and organisations operate across more channels, while also dealing with cost pressures, labour constraints and geopolitical uncertainty.
The broader trend is towards managing changing customer expectations while juggling more dependencies and information to manage. A decade ago, a business might have had a relatively straightforward route from supplier to distribution centre to customer. Now there may be multiple suppliers, channels, locations and fulfilment options involved in serving that same customer.
Businesses can’t build their operating models around the assumption that conditions will eventually return to something more predictable. They need the ability to adapt quickly as those conditions change.
Is greater complexity necessarily a bad thing, or can businesses that manage it well turn it into a competitive advantage?
Complexity can absolutely create opportunity. Additional channels give businesses more ways to reach customers and new fulfilment and supply options can provide greater flexibility. A retailer that can fulfil an order from a store, a distribution centre or another location has more options available when demand changes or inventory is constrained.
I often describe it this way – complexity in the market can be an opportunity, whereas complexity in operational systems and software is a tax. You want the choices and flexibility that come with a more sophisticated business, but you don’t want employees carrying the burden of managing that complexity themselves.
Businesses that do this well can offer customers more choice and respond more quickly without making the organisation increasingly difficult to operate.
Retail is one sector where that complexity is particularly visible, with businesses managing stores, ecommerce, inventory, fulfilment and customer expectations at the same time. What can other industries learn from how retailers are responding?
Retail is a great example of why different parts of a business can’t operate in isolation. A single customer order can involve ecommerce, inventory, a store, a distribution centre and transport, and a decision made in any one of those areas can affect the others.
Retailers have therefore had to become much better at connecting those operations and making decisions across the network. For example, if a product isn’t available in the closest distribution centre, then the next step is finding out whether it can be sourced from another location while still meeting the customer’s expectations at an acceptable cost.
That lesson extends well beyond retail. As businesses become more interconnected, they need a clearer understanding of how decisions in one part of the organisation affect what happens elsewhere rather than optimising individual functions in isolation.
Manhattan has long emphasised the importance and benefits of unification. Functioning with siloed systems not only creates friction but eventually impacts customer experience and loyalty – ultimately affecting growth and revenue.
How can technology help businesses manage complexity, and at what point can adding more systems and platforms actually make the problem worse?
Technology can help businesses manage complexity by connecting information and processes that would otherwise sit across different parts of the organisation. When employees can see what is happening across operations and understand the impact of a decision, they can respond more quickly without having to manually piece that picture together.
Problems arise when technology becomes fragmented. If a separate application is added for every function, employees can end up becoming the link between those systems, moving between them to gather information, understand what has happened and work out what to do next.
That is where software complexity becomes a tax on the business. The aim should be to make the underlying sophistication of the operation easier for employees to manage, bringing the information they need and the actions they can take into one place rather than giving them more systems to navigate.
As operations become more interconnected, how much harder is it for businesses to understand the flow-on effects of a decision, for example, how a change in inventory, pricing or fulfilment might affect customers and other parts of the business?
The more interconnected a business becomes, the more important it is to understand the wider impact of a decision. What looks like the right decision for one part of the operation may create a different challenge somewhere else.
It’s not always easy to foresee those knock-on effects. Different teams may make decisions based on what is happening in their area without seeing how those decisions could affect the rest of the business.
This makes visibility across the operation increasingly important as complexity grows. Businesses need a single and clear view of what is happening across different areas so they can make decisions with the wider business in mind.
Where does AI fit into managing this complexity, particularly in areas such as forecasting demand, managing inventory and helping businesses make faster operational decisions?
AI can be particularly valuable in complex environments where employees need to quickly understand what is happening and determine what action to take. In forecasting and inventory, AI can identify patterns across large amounts of data and help businesses anticipate changes in demand. It can also surface potential issues earlier and give employees the information they need to respond more effectively.
I think the bigger opportunity is making it easier for employees to do their jobs. Instead of spending time moving between different applications and piecing together information, AI can bring the relevant information together and help people understand what is happening and how best to respond.
The value is in giving people a clearer understanding of what is happening so they can make informed decisions and respond more quickly.
What can New Zealand businesses learn from the way AI and other technologies are being deployed globally, particularly by retailers and other organisations with highly complex operations?
What we’re seeing globally is that some of the most valuable applications of AI have a very clear purpose. Rather than trying to apply AI across everything, businesses are using it in areas where there is a specific problem to solve or a decision that can be made easier.
The best place to start is to look at where complexity is already making it harder for people to do their jobs or slowing down decisions. For example, if employees are spending a lot of time gathering information from different systems or manually working through issues, that’s where AI and other technologies can start to make a practical difference.
As complexity continues to grow, what should New Zealand business leaders be doing now to make their organisations more adaptable without simply adding more technology and process?
Leaders should distinguish between complexity that creates value and complexity that creates more work. Businesses need flexibility to respond to changes in demand, supply and customer expectations, but adding a new requirement shouldn’t mean another system, application or process for employees to manage.
Start looking at the organisation from the perspective of the people actually making decisions. How many systems do they need to access? How easily can they understand what is happening across the business? How much manual work is required before they can act?
That’s why innovation and simplification need to go together. New technology should make it easier for a business to respond and adapt, not introduce another layer of complexity. Speed to value matters as well. Businesses need to be able to put new capabilities into the hands of employees quickly enough to make a practical difference.
Ultimately, the organisation should be able to become more sophisticated without making the employee experience more complicated.
