Take care your products and systems don't over-evolve keeping it simplesy

Complexity breeds problems. The more complex a market, system or product, the more there is to go wrong. In product design and development a lot of complication is inherited as there is a tendency to evolve the original rather than going back to the drawing board.

The more bits that are added, the more an existing product design is stretched, the more complex it becomes. Systems too can evolve piecemeal and quickly become unwieldy. A great example can be found in the financial sector where some markets are so complicated, even banks don’t understand them.

Risky business

Hedge funds and financial derivatives trade against future performance. It’s gambling, but on a massive scale. Traders and investors are encouraged to assume large positions, with big risks. But because the initial outlay is comparatively small, the level of speculation is high. There is nothing tangible within the system.

The futures market goes back to the 12th century when European traders signed contracts promising future delivery of the items they sold. The first major losses came in the 17th century, when fortunes were lost after the speculative boom in tulip futures burst. But as the futures market has become more complex, losses and disasters have been reported thick and fast.

Hedging your bets

There are not enough checks and balances on something that’s so complicated not even the banks understand. Meanwhile dealers struggle to clean up market practices. They are under pressure from regulators, who are concerned about potential risks involved in privately-traded derivatives markets. And it gets worse when transactions are not properly documented.

Former US Federal Reserve Chairman, Alan Greenspan, said he had been ‘frankly shocked’ about the mechanics of trading. Traders deal over the phone and rely on scraps of paper to record the details. He added: ‘This is 19th century technology that I find appalling.’

Fat finger syndrome

The more bits that are added, the more an existing product design is stretched, the more complex it becomes. Systems can quickly become unwieldy

But automated technology doesn’t solve all the problems. A slip of the finger by a trader has its own title – fat finger syndrome – which in just one day cost a Japanese bank £128 million. The trader typed in an order for 600,000 shares at 1 yen each rather than one share for 600,000 yen (about £3,000).

This isn’t a one-off. In October 2002 at Eurex, the world’s largest derivatives market, trade stopped for three hours after a trader keyed in the wrong price, causing an index drop of 500 points. In simpler systems errors would be picked up before the damage was done. But the system is so complex and instantaneous that by the time mistakes have been spotted millions have been lost.

Conservatory roofs

It’s the same with products – conservatory roofs are a great example. Manufacturers boast of 6,000 bits in their roof system and some now have up to five systems where one used to do. Having so many products means mistakes are more likely. It’s a picking nightmare with so many products and codes and results in more out of stocks and more mis-picks. Quality control for 6,000 products is a headache, especially if they are outsourced.

Having made life more difficult for customers you then need to help them. They need a bigger technical manual and much more technical support to find their way around the maze. The cost and pain of the suppliers’ lack of clarity and discipline is borne by customers, who are required to adapt.

It’s the same with systems. Over time companies can become bloated and full of overheads. The energy and simple ideas that created the company are swamped and the purpose of the organisation forgotten. Customers once seen as the company’s lifeblood are now expected to accept what’s handed to them and make it work.

A simple philosophy

Our approach to running Synseal is to keep things simple. It’s the basis of our product innovation. We listen to what our customers want and whether its SynerJy, Global or Shield, we aim to make the design simple and our products easier to fabricate and install. But it’s not easy. Over time, systems, company organisation and products have a tendency to evolve and become more complicated. And complexity creeps in by different routes.

It takes time and energy to make things simple. But we think it’s worth it, and our customers agree.