David A. J. Axson.David A. J. Axson President The Sonax Group There are two types of complexity forces--external, which includes, globalization globalization Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation , competition, regulation etc.; and internal, which includes organization structure, process capability, sourcing technology architecture, etc. Today, the issue with external complexity is not so much the growing list of outside forces but the volatility and the unpredictability of these forces. This makes it far harder for companies to sustain market leadership and profitability over the long term. Most improvement efforts over the last 15 years have focused on simplification, with the objective being costsavings. Today finance executives are increasingly focused on enabling flexibility in order to better respond to growing external volatility. It is imperative that financial executives understand not just their cost structure but also their "cost elasticity"--that is, how flexible your cost structure is to business activity changes. Can you sustain profitability during periods of revenue decline, as well as when revenues are growing? The ability to adapt rapidly to changing market conditions will be the hallmark hallmark, mark impressed on silverwork or goldwork to signify official approval of the standard of purity of the metal, also called plate mark. The hallmark was introduced by statute in England in 1300 and enforced by the Goldsmiths' Hall, London. of companies who can sustain profitability over the long term. [ILLUSTRATION OMITTED] Secondly, in an effort to solve internal complexity, extreme efforts have been taken to automate To turn a set of manual steps into an operation that goes by itself. See automation. processes. However, for many the outcome is only one of replacing a variable cost with a stable technology-based fixed cost and not solving the problem. Increasing your organization's cost elasticity creates greater flexibility. Outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. offers one route to increasing cost elasticity. Not only can costs be made to vary with business activity, but you also move the burden of capital investments, technology risk and their management to the third-party partner. A focus on cost elasticity must then be translated into the overall management processes. Embrace uncertainty and ambiguity Ambiguity Delphic oracle ultimate authority in ancient Greece; often speaks in ambiguous terms. [Gk. Hist.: Leach, 305] Iseult’s vow pledge to husband has double meaning. [Arth. , stop predicating your forecasts based on certainty On Certainty (Über Gewissheit) is a philosophical text written by Ludwig Wittgenstein. The main theme of the work is that context plays a role in epistemology. . Look broadly at risk, as it's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have not just about operational execution or more traditional financial risks, such as credit or treasury risk, but increasingly embraces areas like "reputation risk." As finance executives understand that the financial results of any business event are the last step in the chain, they must aggressively seek insights upstream From the consumer to the provider. See downstream. (networking) upstream - Fewer network hops away from a backbone or hub. For example, a small ISP that connects to the Internet through a larger ISP that has their own connection to the backbone is downstream from the larger that provide visibility to future financial results and buy time to react and respond. Contact: daxson@sonaxgroup.com |
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