Why it makes sense to reduce product diversity

Helbling Innovation Blog

Simon Härdi, Head of Development, Innovation Pre-Projects at Helbling Technik, explains in an interview why it pays for companies to bring structure to sprawling product portfolios and reduce complexity.

Simon, why should companies actively tackle complexity management and reduce their product diversity?

Due to cost and competitive pressures or also because of automation projects, no company can avoid reducing its product range complexity. A complex product range generates many internal expenses – from engineering and manufacturing to inventory management and customer service. This leads to high costs, which are usually hidden in the overheads. High costs in turn have a negative impact on earnings. Design to order also absorbs a lot of internal resources and takes time, and neither is usually available in excess. If the product range, or at least part of it, is streamlined, structured or standardised, this reduces costs. Resources are freed up which can be used for innovation.

Which approach do you choose for optimising product portfolios?

A structured and pragmatic approach. We use appropriate tools and methods such as portfolio analysis, customer surveys, needs characteristics matrix, variant matrix or MiniQFD. However, not every tool is suitable for every assortment. We bring in the knowledge of where which approach works. In doing so, we benefit from our technical experience and market expertise. In complexity management, both are needed. We always start with the current portfolio and the current market performance that a company provides. Foreseeable trends must also be taken into account. We analyse whether the needs of the market – independent of the existing product – can be structured. It is about identifying a pattern of commonalities. If we find this pattern, it opens up new possibilities on how the assortment could be structured more efficiently.

What are the biggest hurdles for companies to manage their complexity?

In some cases companies accept complexity as a misunderstood customer orientation. The challenge of reducing complexity seems so great that they find it difficult to get started. Another obstacle is the upfront investment they are required to make. If a company so far only reacted when a customer ordered, now they suddenly need to make advance investments in engineering. This is a paradigm shift that usually cannot take place overnight. Ideally, an optimised product portfolio leads to lower resource requirements for the same market performance, lower overhead costs, shorter lead times, opportunities for automation and a more sensible use of development resources.

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