It’s a very good insight that simplicity is rare in business because the cost of complexity is difficult to measure.

Some more reasons why simplicity is a virtue found rarely in business:

- Complexity tends to be associated with intellectual sophistication. People want to feel they are doing a job that needs highly specialized and esoteric knowledge.

- Complexity often feels safer (if what we’re doing is simple, can’t it be easily commoditized / copied ..?)

- Complexity also usually makes things foggier to customers /suppliers etc., and this information asymmetry can be used to set pricing or other features of the product to the company’s advantage.

The complexity is often a result of internal disagreements regarding how the product is to be designed, made or sold. For example, sometimes the only way to call a truce between warring departments is to find a solution that “nobody will object to”. It’s hard to keep everybody happy, and still be simple and direct. (this is why diplomats speak some of the most complex language on the planet).

It is also true that customers value simplicity. However, the simple but inescapable reality seems to be that – sloganeering about the customer being King notwithstanding – for most businesses, the customer just occupies a very low position on the mental map.

Thus, even if those finance boffins could factor the cost of complexity into their spreadsheets, I’m not entirely sure they would – my guess is that they would factor in the portion of the cost that is borne by the business, but not the portion of the cost of complexity that is borne by external entities (including the customer)!

A recent experience that shows how companies are unwilling to bear even a tiny cost to make things easier for the customer: Last month my wife and I had a reservation to fly from Frankfurt to Bangalore. To our surprise, when we reached Frankfurt airport to check in, we discovered that the airline had invalidated my wife’s reservation! The reason, we discovered, was that we didn’t take a flight from Rome to Frankfurt 8 days earlier (we had decided to take a train instead and see the countryside). It appeared to defy logic that an airline should assume that you won’t board a flight you have reserved from city B to city C, just because you didn’t board the flight from city A to city B 8 days ago! I wrote to them indignantly and they have come back with a rather complicated and long-winded explanation and I have to admit that the explanation appears to make some sense (or at least the parts I could grasp in a rapid reading appeared to make some sense!). In any case, I am not questioning the correctness of the policy: my reason for mentioning this here is that, if a company must have a policy that is so difficult for customers to understand, the least they can do is put in some extra effort to minimize the impact on the customer! In this case, the airline had my contact nos, email and also those of the travel agent who had done the booking. Would it have been difficult just to inform me before taking such a step?!

Of course, the reason why companies place so little weightage on cost to the customer is not anything nefarious. The simple reason is that most companies are just poor at seeing things from the customer’s point of view. An example: I recently received a long letter from a senior executive of the bank whose customer I am. The letter spoke glowingly of the bank’s dedication to customer service,and extolled their high quality products etc. I was quite impressed, until I saw the designation of the executive who had written it: Head – Retail Liabilities. It was only then that I realized that holding a savings account with that bank makes me a “liability” to them! Now, I am sure if they paused to think about it for a minute they can come up with a perfectly good title such as Head – Retail Banking or whatever. It’s just that it has probably never occurred to them that customers may not relish being thought of as “liabilities”!

However, I often find people who seek simplicity in one aspect of life don’t remember the same when they go about creating something in their own area of expertise.

Is this just simple oversight, or a more deeper failure to control one’s urge to apply expertise? – I wonder.

Pricing optimization can add huge amounts of profit – even for airlines. But naive optimizations wind up frustrating customers and killing the brand.

It’s entirely possible Southwest also optimizes, but does it more carefully.

@Balaji: Yes, simplicity is a virtue. And I agree they have choices that get out of hand sometimes… but how else would you define how much milk, sugar, cream or chocolate you want? YOur idea of sweet may be different from mine. And if you dont want to choose, you can always tell them to make it like they always do – or ask them to surprise you. Either of those work.

A very good example to show how simplicity works for a customer. I really do get frustrated when i go into a coffe shop and they have a myraid of choices listed down for you and expect you to know what they mean.

For eg. You say coffe, should it be large, regular, small
b) With milk with out milk
c) if with milk, should be skimmed milk, semi skimmed milk or whole milk
d) cream or no cream
e) choclate or no chocolate
etc. etc….

All you wanted to have a hot cup of coffee…isn’t it?

I fully agree with your comments. It seems like Airlines like American,US Air ways, United are passing their high operational cost due inefficient operation and legacy systems(people) to end customers. Competetiveness is almost NIL in certain routes and airports as there is no option for you.
We deperately need a law to identify tier-1,tier2 routes and make ateleast 2-3 airlines available. This way the old monster will move and care about customer satisfaction and value for the money.
My esp. with Southwest and Airtran seems to be very positive and they are flourishing because morre and more customers are frustrated with “traditonal” airlines.

regards,
venkat

Only that pricing an airline seat is complicated given its economics, and my guess is that most are national airlines and vastly underestimate the true value of a customer.