Navigating disruption and complexity
How companies can navigate disruption, sharpen focus, and create capacity for what’s next
You launch a product, make an acquisition, invest in AI, or change how the business operates to pursue growth and respond to disruption. Each move can create value. Each can also add complexity. Over time, that complexity adds cost, slows decisions, and ties up resources. The very moves intended to drive growth and respond to disruption can make the next move harder.
That’s when complexity becomes a growth problem: the organization has less capacity to respond to threats and pursue new opportunities.
Effective complexity management starts with understanding where it comes from, what it costs, and where it creates value. Done well, it can strengthen performance today and create the capacity to respond to disruption, invest in new opportunities, and grow.
Organizational complexity comes from the number of things a company must manage—and the connections among them. As companies add products, customers, systems, and organizational structures, each new element creates additional work and interactions across the business.
in products, SKUs, services, and offerings
in segments, requirements, pricing, and service levels
in variations, exceptions, approvals, and handoffs
in systems, platforms, applications, and data
in structures, roles, decision rights, and ways of working
Complexity compounds as the business grows. A new product, for example, doesn't just add portfolio complexity. It can create new requirements across sourcing, manufacturing, inventory, sales, pricing, finance, technology, and customer service. As more products, customers, processes, and systems are added, the connections among them multiply. And so does the effort required to manage the business.
Over time, those choices can create enough cost and complexity to make the next stage of growth harder to achieve.
We call this the “growth paradox.” Breaking the growth paradox requires disciplined complexity management: understanding the true costs of complexity, changing or removing complexity that no longer creates sufficient value, and focusing resources on the products, customers, and opportunities that can scale profitably.
Complexity is a system-level problem: where its costs appear is often not where they originate. Managing it requires addressing the causes, not just the symptoms.
Not all complexity is bad.
Good complexity helps a company deliver what customers value—whether through differentiated products, tailored service, or capabilities that create competitive advantage.
Bad complexity adds choice, variation, and work without creating enough customer or business value in return.
There is a limit to how much complexity an organization can effectively carry. Think of it as a "complexity budget." A company with a highly complex product portfolio, for example, has less room for complex processes and systems. The challenge is deciding where complexity creates enough value to justify the cost. The goal is to understand where complexity earns its keep—and simplify where it doesn't.
Complexity costs are the additional costs created by the variety of products, customers, processes, systems, and services a business must support—and the interactions among them. Unlike fixed or variable costs, they can grow disproportionately as variety and connections increase.
Traditional accounting makes some of these costs difficult to see. Fixed costs remain relatively stable and variable costs rise with volume. Complexity costs behave differently: they increase as variety and the interactions required to support it increase.
The impact can be significant: Our research shows that a third or fewer products often generate up to 300% of profits. The rest can erode those gains.
A low-volume product, for example, may appear profitable when viewed through traditional costing. But that calculation may not capture the additional planning, inventory, manufacturing, sales, service, and administrative work the product creates. Much of that expense gets absorbed into overhead rather than attributed to the source of the complexity.
The effect shows up throughout the business. Decisions take longer. Leaders have less visibility into where profits are actually generated. Resources become spread across too many priorities. Capital and talent remain tied to activities that may contribute little to performance.
The result can be growth without the expected improvement in profitability or scale. As complexity consumes more resources, companies also have less capacity available to invest in future growth. The goal is to grow with scale, not complexity.
As complexity grows with more revenue and product, costs grow exponentially to a high point.
Managing complexity can improve growth in two ways. It can sharpen the company's focus on the products, customers, and capabilities that create the most value. And it can free resources, attention, and flexibility to pursue new opportunities. The aim isn't simplification for its own sake. It's to redesign the business around the complexity that creates value and remove the cost and effort that doesn't.
Companies often add products, features, service levels, and customer-specific requirements in pursuit of growth. Over time, that variety can make it harder to see which differences customers truly value and which simply add cost and operational burden.
Managing complexity means understanding where differentiation matters—and concentrating the portfolio, commercial effort, innovation, and service around it. The result can be a clearer value proposition, stronger execution, and more profitable growth
In practice: A global drilling company had regained revenue growth following an industry downturn, but years of product proliferation had eroded the benefits of scale.
By identifying the true profitability of its portfolio, the company was able to target products for rationalization, change pricing and production policies, and put new controls in place to prevent complexity from building again. The This put the company is on track to double EBIT within 24 months and reduce working capital by 15%.
As companies grow through acquisitions, new markets, or geographic expansion, different processes, systems, and ways of working can accumulate. Companies need to identify where variation serves a real business need and where it simply adds cost and coordination.
Simplification doesn't mean uniformity—or simply doing less. It means removing unnecessary variation while preserving the differences required to serve distinct customers and markets, and changing the processes and structures that supported that variation.
That can mean consolidating common processes, clarifying ownership and decision rights, simplifying handoffs between functions, and creating different operating models for parts of the business with genuinely different needs.
In practice: Following a merger, a multibillion-dollar staffing company was still operating as more than 300 largely independent local businesses. Rather than impose a single model across every branch, the company segmented the network and redesigned processes to balance centralized standards with the flexibility required by different markets.
The changes contributed to a $120 million increase in revenue, a $20 million improvement in gross margin, a more than 500-basis-point increase in staffing fill rates, and a $30 million reduction in working capital.
Organizational complexity can leave people navigating overlapping roles, competing priorities, inconsistent practices, and layers of rules designed to keep work coordinated. Addressing it requires more than removing organizational layers.
Companies can clarify accountability and decision rights, simplify how work moves across functions, and establish common expectations for how decisions are made and work gets done. In high-risk environments, that can also mean replacing an accumulation of procedures with a smaller set of principles and behaviors that create greater consistency and operational discipline.
In practice: A petroleum company operating five refineries faced rising safety risks as it rapidly developing new systems and procedures. Instead of relying on additional procedural fixes, the company established five shared cultural principles and translated them into specific behaviors across the organization. Safety incidents fell by more than 70%, refinery utilization improved by nearly 5%, and approximately $200 million in EBITDA was captured.
Managing complexity can make the existing business more responsive to changing customer needs while freeing resources to pursue entirely new sources of growth. These opportunities still compete with the existing business for capital, talent, and management attention. Creating capacity starts with identifying where resources are committed to activities that no longer support the company's priorities.
Companies can simplify the core, stop or scale back lower-value activities, and deliberately reallocate the resources released toward new capabilities, business models, and growth opportunities. “Future-back” strategy can help connect those choices to a longer-term view of where the company intends to compete.
In practice: Facing rising labor costs and pressure on profitability, a global convenience retail store chain used future-back strategy to rethink both its cost structure and the future of its retail model. The company began centralizing administrative work and using automation to improve efficiency while investing in new store formats, EV charging, and other services designed around changing customer needs.
The changes are expected to generate up to $500 million in annual labor savings, freeing resources to reinvest in innovation and future growth
Adding AI to an already complex organization can automate work without addressing whether that work should exist in the first place. Before deploying AI at scale, companies should examine the processes, systems, data, and decisions around the work itself.
That means determining what can be eliminated or standardized, what should be redesigned, and only then where AI can automate or augment the remaining work. It also helps avoid adding another layer of tools and governance to processes that are already fragmented.
Complexity management is an ongoing discipline. Without it, new growth can simply rebuild the complexity that was removed.
More revenue isn’t producing better margins.
Capital, talent, and attention remain tied to existing priorities when the business needs them elsewhere.
Growth and acquisitions have added size without making the business easier to run.
Routine decisions require too many steps, handoffs, and exceptions.
Products, processes, systems, and requirements continue to accumulate.
Products, services, and customization keep multiplying without producing corresponding differentiation, loyalty, or growth.
Andrei Perumal explains why adding products, markets, and adjacencies can cause complexity.
Complexity cuts across the enterprise, but its impact looks different depending on what you're accountable for. The same underlying complexity can show up as a growth problem for one executive, a profitability problem for another, and an execution problem for someone else.
Growth can add revenue without delivering the expected gains in profitability or scale. CEOs and business unit presidents need to understand where complexity supports competitive advantage and where it is making the business harder and more expensive to grow. Managing that complexity can strengthen the economics of the core business while making it easier to pursue the next source of growth.
A clear growth strategy doesn't guarantee the organization has the resources to deliver it. Capital, talent, and management attention can remain tied to legacy businesses, products, and initiatives even as priorities change. Managing complexity can help free those resources, sharpen trade-offs, and make it easier to stop or scale back activities that no longer support the strategy.
Traditional financial measures can obscure the resources required to support different products, customers, and services. That can make seemingly profitable growth less attractive once the full costs of complexity are understood. Greater visibility into complexity costs can inform decisions about portfolios, pricing, service levels, investment, margins, and working capital.
For operating executives, complexity often appears as process variation, excessive handoffs, fragmented systems, unclear decision rights, and exceptions that require more people and effort to manage. The opportunity is to remove unnecessary variation while preserving the differences customers and markets actually value—making the business easier to operate and scale.
Technology can eliminate complexity, but it can also embed or accelerate it. Digitizing fragmented processes or applying AI to work that no longer needs to exist can simply make existing complexity move faster. Simplifying and redesigning the work first creates a stronger foundation for technology and AI to deliver value.
Discover how complexity costing reveals where a business truly makes money and where hidden costs are eroding profitability.
Our annual summit brought together senior executives to examine one of today's defining leadership challenges: navigating the twin forces of complexity and disruption.
The company improved execution by aligning centralized functions with the needs of its diverse branch network.
Learn how measuring and managing complexity is becoming a differentiating capability for leaders.
Managing Director
,Strategy and Operations
Andrei Perumal is a Managing Director at Innosight, Huron’s strategy and operations business. He was a co-founder of Wilson Perumal & Company, acquired by Huron in 2025. Andrei is an expert on how complexity impacts cost, growth, and risk—and therefore strategy and operations—in companies and organizations. He is co-author of two books, Waging War on Complexity Costs and Growth in the Age of Complexity and is a regular speaker on complexity.
Managing Director
,Strategy and Operations
Stephen Wilson is a Managing Director at Innosight, Huron’s strategy and operations business. He was a co-founder of Wilson Perumal & Company, acquired by Huron in 2025. He works closely with senior leaders of multinationals and private equity firms—and their portfolio companies—on critical strategy and operations issues. He has industry depth in industrial goods, consumer goods, retail, and business services.
Managing Director
,Strategy and Operations
Managing Director
,Strategy and Operations
Disruption isn't new. Innosight cofounder and pioneer of the concept of disruptive innovation Clayton Christensen first showed decades ago why successful companies can struggle to respond when new entrants change the basis of competition.
In his acclaimed book, The Innovator’s Dilemma, Christensen showed how the very practices that make established companies successful—serving their best customers and directing resources toward the strongest returns—can leave them vulnerable to disruptive entrants. Today that dilemma remains: companies must continue to strengthen the core while finding the resources to respond to disruption and pursue new growth.
What is changing is the speed at which those threats—and opportunities—can emerge.
AI is changing practically everything. New entrants can automate core functions, develop and test offerings faster,
and scale with fewer resources. Digital business models allow competitors to cross traditional industry boundaries and give customers new ways to solve familiar problems.
For established companies, that creates pressure from both directions: respond faster to threats while investing in new sources of growth. Yet those investments compete for capital, talent, and attention with the existing business.
What this means:
That is where disruption and complexity collide. The more resources consumed managing accumulated complexity, the less capacity the organization has to respond when the basis of competition changes. And responding by simply adding another product, technology, process, or initiative can compound the problem.
For more than 25 years, Innosight has helped companies navigate disruption and create new sources of growth. Our expanded expertise in organizational complexity now helps companies strengthen performance and create capacity for what comes next.
We help companies understand where complexity creates customer and business value, eliminate complexity that doesn't, and simplify portfolios and operating models to improve performance and growth.
Huron is a global professional services firm that collaborates with organizations to help solve their most complex challenges and achieve their most ambitious goals. Working across the private and public sectors, we partner closely with clients to improve performance, accelerate transformation, and unlock new opportunities for growth.
Our clients choose us because of our deep industry and technical expertise and proven track record of turning sound strategies into action. By combining practical experience, innovative thinking, and advanced analytics and technology, Huron helps organizations translate today’s ideas into tangible results and long-term value.
© Copyright 2026, All rights reserved by Huron