Less is more

Complexity hinders revenues, a new study by consultancy Bain & Company reveals. The research found that the revenues of companies using simpler models grew 1.7 faster than their competitors.

by Bain & Company
Last Updated: 23 Jul 2013

The findings suggest that hyper-innovators and complex companies make it too hard for people to find exactly what they want, or for their sales team to match product and customer. It also makes it difficult to identify top sellers and keep them in stock.

"We found that cutting complexity often creates additional revenues, not just reduces costs," said Mark Gottfredson, head of Bain's global performance improvement practice.

Only 19% of executives surveyed know the true costs of complexity, and just a quarter of them believes that their organisation has the capabilities to manage complexity effectively.

Bain points to Chrysler as a prime example of what less complexity could achieve. The company conducted a test in California whereby it selected the 200 top-selling car configurations (out of 5,000) and, using detailed market analysis, indicated to each dealer which four to six models would best work in their local area.

The pilot test was initially met with resistance from the sales and marketing team, arguing that it would reduce customer choice. But the lower complexity approach actually resulted in sales 20% higher than the standard model. Customers purchased cars directly off the lot and less sales were lost to competitors.

"Innovation is not a bad thing," says Gottfredson, "just sometimes too much of a good thing." To keep complexity costs down, Bain suggests identifying the cost of a stripped 'one product', and to quantify adding layers of complexity to it. That way, companies will have a true picture of the costs of complexity.

Review by Emilie Filou

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