Companies are either set up for complex systems or volume operations.
Like the difference between the Animal and the Plant Kingdoms, these businesses have totally different DNA. Companies are either configured to do one or the other, trying to straddle both of them tends not to be stable.
Volume Operations are set up to deliver standardised products to high volume markets. Complex Systems solve unique client problems with customised solutions.
This concept was expanded by Geoffrey Moore in “Dealing with Darwin”.
When is it useful?
It will bring strategic clarity to a company to identify which of these two breeds it is. Then it can focus of being best of breed and not trying to cross the line to compete with the other type. Crossing the line introduces trade-offs that will weaken your competitive advantage.. It is particularly useful in hi-tech/digital industries.
Some of the strategic alternatives and opportunities identified in your strategic planning will cross the divide. It will be very hard for a company to change its DNA to win in these. It can either:
- Partner with a company that has different DNA and share the value in the opportunity
- Set up a start-up completely outside the culture of the main company, with a different type of people, systems, processes and incentives
Some future industry scenarios are based on a trend to complex systems, others can standardise to volume operations.
Some Enterprise Software Development companies do bespoke work for their clients, creating a customised solution to their specification. This is a classic “Complex Systems” company.
Once they have created this solution for their customers, they realise that there are other companies with the same challenge as their client. Rather than develop customised solutions for them, they try to leverage the system they have already created and “productise” it, creating a standard “off-the-shelf” product that can be rolled out with minimal extra configuration. This requires more of a “Volume Operations” mindset.
Complex Systems DNA works well for research companies, but then commercialising the breakthrough favours Volume Operations. This leads to natural partnerships – for example, a Complex Systems Biotech company licencing its breakthrough drugs to a Volume Operations pharma company to scale. The hand-offs between these two types can define the boundaries of value chains and industries.