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Waging War on Complexity Costs

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Waging War on Complexity Costs

Reshape Your Cost Structure, Free Up Cash Flows, and Boost Productivity by Attacking Process, Product, and Organizational Complexity

McGraw-Hill,

15 mins. de lectura
10 ideas fundamentales
Texto disponible

¿De qué se trata?

Companies gain competitive advantage when they eliminate complexity.

Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

A company’s complexity directly affects its cost structure, the biggest determinant of its capacity to compete. Businesses can gain enormous advantages by minimizing or eliminating complexity. For example, offering a wide variety of products and services may be inefficient, while a condensed product line could improve a company’s profitability. Not all complexity is counterproductive, so distinguishing “good complexity” from “bad complexity” is critical to simplifying a business. Consultants Stephen A. Wilson and Andrei Perumal promote a thorough – though sometimes, ironically, complex – approach to complexity control that unearths “non-value added” spending you can target for reduction. While the authors’ systematic prescriptions clearly apply to large companies with extensive product and service lines, getAbstract believes this book can also be useful to small and midsize businesses as a tool for weeding out wasteful complexity.

Summary

Variety at Any Cost?

Familiar all over the the world for its characteristic three-sided shape, the Toblerone chocolate bar nonetheless morphed over the past century into various sizes and versions, depending on geographic market. Food giant Kraft took over Toblerone and made it part of a corporate “decomplexity effort.” The manufacturer cut product expenses by standardizing the chocolate bar’s size and reducing the number of plants that produced the brand from nine to one. Kraft also slashed process costs in marketing, packaging and supply chains. All told, Kraft realized pretax savings of $400 million annually, just by simplifying a chocolate bar.

Companies introduce complexity into their business by extending their product lines – along with the procedural and organizational costs that entails – to provide customers with as many choices as possible and to promote revenue growth. Some organizations continue to offer older goods after introducing new ones. By doing so, they hope to avert a revenue decline. Other businesses sell certain products in small volumes and at low prices that barely cover production costs, let alone administrative expenses. But offering too...

About the Authors

Stephen A. Wilson and Andrei Perumal are managing directors at Wilson Perumal & Company, a management consultancy.

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