Complexity Cost

Complexity Cost

Complexity Cost Jonathan Poland

Complexity cost is the cost associated with making something more complex. Complexity can have a range of costs, including increased operational costs, higher maintenance costs, and greater difficulty in making changes to the system.

Adding complexity to a system or process can sometimes be justified if the value that is delivered by the complexity outweighs the associated costs. However, it is important to carefully consider the trade-offs between the value delivered by complexity and the costs that it incurs.

In general, it is important to strike a balance between the benefits of complexity and the costs that it imposes. Too much complexity can lead to inefficiency and increased costs, while too little complexity may not provide the necessary functionality or value. Finding the right balance will depend on the specific context and the needs of the system or process in question. The following are generalized examples of complexity costs.

Learnability

It is more difficult to learn to use something that has 100 functions than something that has 10 functions.

Usability

It may be more pleasing and productive to use a tool that has 10 buttons as opposed to a tool that has 100 buttons. For example, an air conditioner with too many functions may be unpopular with customers who simply want clean, temperature controlled air.

Efficiency

Complexity may reduce economies of scale. For example, a production line that produces one product may produce far more total value than a production line that is stopped and reconfigured for production runs of different products.

Communication & Politics

Complex organizations face increased communication costs as coordinated efforts involve more stakeholders. Office politics may be more intense in a large firm leading to irrational decisions such as hiring middle managers to boost the status of an executive.

Maintenance

Complex things with many unique parts may be costly to maintain. For example, a machine composed of thousands of obscure parts may be costly to maintain as compared to a machine with dozens of commodity parts.

Operations

The cost of operating complex things. For example, troubleshooting software with 1 million lines of code may be more difficult than solving problems on a smaller code base.

Overhead

Administrative and marketing overhead. For example, it is more costly to manage promotion, advertising, distribution, sales, pricing and customer service for a large portfolio of products.

Supply

The cost of procurement and managing a supply chain. For example, an organic cosmetic company that uses 12 ingredients from 3 suppliers may have reduced supply costs as compared to a competitor that uses 250 ingredients from 28 suppliers.

Performance

Complex things may be slow. Given the same resources, software with 2 million lines of code typically runs slower than software with 20,000 lines of code.

Risk

It can be costly to identify and manage the risks associated with complex things. For example, information security is more challenging in an environment with hundreds of different technologies as opposed to a single platform.

Change

It tends to be costly to change complex things. For example, improving a food product with 3 ingredients is less costly than improving an aircraft with 2.3 million parts.

Learn More
Regulatory Risk Jonathan Poland

Regulatory Risk

Regulatory risk refers to the risk that a company will face regulatory actions or penalties as a result of non-compliance…

What is Risk Communication? Jonathan Poland

What is Risk Communication?

Risk communication involves informing people about potential hazards and the steps that can be taken to prevent or mitigate those…

Competitive Advantage Jonathan Poland

Competitive Advantage

Competitive advantage refers to the unique advantages that a firm possesses over its competitors. In a highly competitive industry, firms…

Volatility Risk Jonathan Poland

Volatility Risk

Volatility risk is the possibility that changes in the volatility of a risk factor will lead to losses. Volatility is…

Net Nuetrality Jonathan Poland

Net Nuetrality

Net neutrality is the principle that all internet traffic should be treated equally, without discrimination or preference given to certain…

Motivation Jonathan Poland

Motivation

Motivation is the driving force that inspires people to take action and pursue their goals. It is an important factor…

Professional Skills Jonathan Poland

Professional Skills

Professional skills are a combination of talents, abilities, knowledge, and character traits that are necessary for a person to be…

Customer Experience 101 Jonathan Poland

Customer Experience 101

Customer experience (CX) refers to the overall experience that a customer has with a company or brand, from their initial…

Information Advantage Jonathan Poland

Information Advantage

A unique knowledge that provides a competitive edge in a specific situation is known as an information advantage. This advantage…

Content Database

Search over 1,000 posts on topics across
business, finance, and capital markets.

Management Challenges Jonathan Poland

Management Challenges

Management challenges are obstacles, difficulties, or inefficiencies that make it difficult for managers to achieve their goals and objectives. These…

Sales Quota Jonathan Poland

Sales Quota

A sales quota is a target for the revenue or units sold that a sales department, team, or individual is…

Innovation Risk Jonathan Poland

Innovation Risk

Innovation is a proactive approach to business and design that aims to make significant improvements, rather than simply making incremental…

Drip Marketing Jonathan Poland

Drip Marketing

Drip marketing, also known as drip campaigns, is a strategy that involves sending targeted and personalized marketing messages to a…

Relationship marketing Jonathan Poland

Relationship marketing

Relationship marketing is a type of marketing that focuses on building long-term, mutually beneficial relationships with customers, rather than just…

Veblen Goods Jonathan Poland

Veblen Goods

Veblen goods are a type of consumer good that is perceived as being more valuable or desirable because of its…

What is Competitive Parity? Jonathan Poland

What is Competitive Parity?

Competitive parity is a marketing strategy that involves matching or aligning a company’s marketing mix with that of its competitors.…

Marketing Metrics Jonathan Poland

Marketing Metrics

Marketing metrics are a way to evaluate the success of marketing efforts at various levels, such as the organization, team,…

Preventive Maintenance Jonathan Poland

Preventive Maintenance

Preventive maintenance is a type of maintenance that is designed to prevent failures and extend the lifespan of assets, including…