Simplify and reduce complexity in your business to succeed.

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As everyone knows, big companies are often very complex. This means managers must be adept at managing complexity, and they often even enjoy the challenge and intellectual stimulation it provides.

But is accepting or even inviting complexity really the best way to become a successful company?

Most people believe that size and a broad product portfolio are advantageous for a company, because the more products a company sells, the more profit it is supposed to generate.

But in fact, internal complexity has huge hidden costs. A broad range of products requires, among other things, more complicated logistics, more training for salespeople and a lot more administrative work than a narrow range. These factors increase the overall cost to the company – possibly even more money than the additional products bring in.

On the other hand, simplifying your business reduces costs. If you narrow down and focus your product range, everyone in the company will be able to devote their full attention to the few products that are sold. This lets them understand the few important products in a more profound way than if they needed to juggle dozens of them. This in turn simplifies administrative work, and also brings economies of scale – benefits gained from doing more of the same thing – in areas like production and logistics.

The power of these benefits is clear. For example, a study of 39 medium-sized companies found that the least complex ones were the most successful. They sold a narrower range of products to fewer customers and also had fewer suppliers, which resulted in higher profits.

Clearly, by simplifying your business, you can reduce costs, and thereby increase your profitability.

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