David A. J. Axson.

• Author: Schulman, Donniel S.
• Position: Manage Your assets - Sonax Group

David A. J. Axson

President The Sonax Group

There are two types of complexity forces--external, which includes, globalization, 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 of companies who can sustain profitability over the long term.

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Secondly, in an effort to solve internal complexity, extreme efforts have been taken to automate processes. However, for many...