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Management article
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Reference no. U0505A
Published by: Harvard Business Publishing
Published in: "Harvard Management Update", 2005

Abstract

Managers today are under intense pressure to deliver growth, but as they and their teams mobilize to respond to this challenge, they may unwittingly go backward. Indeed, the zeal to grow revenue can introduce a costly and unmanageable level of complexity that obscures pieces of the business and drags down overall profitability. With greater complexity come costs across the business that are not readily apparent or easily traced to their origin. Greater complexity also obscures the profit contribution of individual components, making it difficult for senior managers to make the right calls on what to offer, at what price, and to whom. Digging into the actual costs of individual products, brands, channels, and customers helps managers at all organizational levels develop an understanding of how complexity affects each link in the company''s value chain - and refine the strategy based on that knowledge. Read about initiatives that have helped numerous companies simplify for value.

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Abstract

Managers today are under intense pressure to deliver growth, but as they and their teams mobilize to respond to this challenge, they may unwittingly go backward. Indeed, the zeal to grow revenue can introduce a costly and unmanageable level of complexity that obscures pieces of the business and drags down overall profitability. With greater complexity come costs across the business that are not readily apparent or easily traced to their origin. Greater complexity also obscures the profit contribution of individual components, making it difficult for senior managers to make the right calls on what to offer, at what price, and to whom. Digging into the actual costs of individual products, brands, channels, and customers helps managers at all organizational levels develop an understanding of how complexity affects each link in the company''s value chain - and refine the strategy based on that knowledge. Read about initiatives that have helped numerous companies simplify for value.

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