Unraveling Complexity in Products and Services
Walk into any grocery store, bank, or insurance agency, and you will see complexity at work: More products and services are available to consumers than ever before. But, as businesses increase their product and service portfolios in response to evolving customer demands or through mergers and acquisitions, they run the risk of adding too much complexity, which can tax existing resources and ultimately harm returns. In this special report, experts from George Group Consulting and Wharton offer insight on how complexity can create considerable problems for companies — often while remaining difficult to spot — and suggest strategies for eliminating complexity or making it work to a company’s advantage.
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Complexity in Products and Services: Good or Bad, Depending on How You Manage It
In an age of rapid product and service proliferation, companies are grappling with their portfolios of businesses, products, services and delivery channels to see which of them need to stay, be restructured, or be dropped. Knowledge at Wharton and George Group Consulting examined this issue in an online survey of Knowledge at Wharton readers completed last fall: Covering 424 executives drawn from more than 30 industry groups including financial services, business services, information technology, foods, industrial manufacturing and healthcare, the survey’s findings indicate that complexity can impact companies on a number of levels — from sales effectiveness, product quality and customer satisfaction, to capital efficiency and profitability. However, the survey respondents and experts from George Group and Wharton note, complexity can have an up-side if it is recognized and managed effectively.
In a recent advertising mailer, one of the largest U.S. grocery retailers boasted having 300 varieties of beer and 1,800 varieties of wine. It seems like a great sales pitch, but what is the impact of all that variety on costs? Moreover, with 1,800 varieties of wine, what will be the customer response — confusion or delight? Experts from George Group Consulting and Wharton agree that increasing product complexity in both retail and manufacturing is a very slippery slope: As a means of meeting evolving consumer demands or capturing new market share, expanded product portfolios can backfire because of the strain they place on already scarce resources, and because true profitability is masked. In addition, as companies expand their offerings, complexity can seep into internal processes, producing inefficiencies that can lead to customer dissatisfaction down the road.
According to experts at Wharton and George Group Consulting, service companies such as banks or airlines are closer to their customers than their counterparts in the manufacturing industry, which can be beneficial, but they may be too close for comfort. In fact, they could actually be smothering both themselves and their customers with dispensable or outdated offerings, made worse by overburdened internal processes that ultimately hurt the essential elements of survival — customer service and satisfaction.