Over the past two decades, my colleagues and I have helped many businesses
create shareholder value primarily through process improvement.
But we often found that clients who restricted their efforts to improvement
approaches such as Lean and/or Six Sigma would hit a ceiling in
profit generation: though progress was significant, there was only so
much they could accomplish through process improvement.
Where did this ceiling come from? Our most recent research and our
experience over the last few years led us to a startling conclusion: that
there is an entirely separate dimension to operating improvement that
often presents the single largest opportunity for cost reduction and the
most significant hurdle to profitable growth in most companies.
What is this mysterious force? Complexity.
Here’s a guarantee: Somewhere in your business, there is too much
complexity—more product offerings than your customers want, more
services than your markets can support with positive Economic Profit,
too many ways of accomplishing the same output, etc. This kind of
complexity generates huge non-value-add costs, work your customers
wouldn’t want to pay for if they had an alterative. These costs are enormous
in terms of lost profit and growth, and are hidden in overhead—
a hidden profit pool of huge potential.
It’s also possible that there may be places in your business with too little
complexity in your offerings, where you’re missing opportunities by
having too few options for your customers. And there’s another contributor
to the hidden profit pool: revenues you could easily generate if you
understood what your customers value and are willing to pay for.
Every CEO and senior executive who has seen the data presented in this
book has responded “We know we have complexity. We know it’s a big
problem. We want to know more.” Supplying the “more” is one purpose of