DALLAS and PHILADELPHIA, Feb. 6, 2006 (PRIMEZONE) -- Despite the positive revenue impact of new product and service offerings and the push for product proliferation, portfolio complexity often fails to deliver real economic value, according to findings from a new study by George Group Consulting and Knowledge@Wharton, an online resource for business executives from the Wharton School, University of Pennsylvania. The Impact of Product and Service Complexity on Business report, based on a survey of 424 Knowledge@Wharton subscribers representing a broad range of industries, examines the drivers of product and service complexity, the pressures this complexity places on an organization's ability to grow and maintain profitability, and key factors shared by companies that successfully manage portfolio complexity.
"Portfolio proliferation is viewed as a source of competitive advantage and, in some industries, has become a basic requirement to compete," said Stephen Wilson, Engagement Director of the Conquering Complexity Practice at George Group Consulting. "However, companies tell us that while this complexity often contributes to top-line revenue growth, it also tends to negatively impact such areas as cost competitiveness, lead time, product quality, sales effectiveness, and customer service and satisfaction. This makes converting revenue growth from new products and services into true profitability an especially difficult challenge."
Key findings from the report include:
-- Product proliferation is pervasive. The vast majority of
executives surveyed (85 percent) report that the number of
product and service offerings at their company has grown by at
least 10 percent over the past five years. Nearly half of these
respondents say that these offerings have increased by more than
50 percent.
-- Product proliferation often fails to deliver real economic
value. Nearly half (44 percent) of the survey participants
find that the breadth and depth of their product and service
offerings have either a negative or negligible impact on
profitability. More than two-thirds (70 percent) say that this
portfolio complexity has a negative to negligible impact on
capital efficiency as well.
-- Companies that successfully drive complexity to profit share
three important characteristics. First, these companies are
very disciplined about the products and services they offer,
with formal processes in place for adding and deleting products
and services from their portfolios. Second, their processes for
product and service selection are supported by sophisticated
systems for fully capturing the costs of complexity, as well as
profitability metrics that take into account the entire spectrum
of resources required to generate profits from portfolio
expansion. Finally, these companies are focused on achieving
cost reductions through a culture of continuous improvement and
process efficiency.
"As corporations develop new marketing strategies to remain competitive, and as they develop new targeting strategies, complexity management becomes absolutely key," said Eric Clemons, Wharton professor of operations and information management. "But solving complexity doesn't mean eliminating bells and whistles -- it means giving the customer a reason to buy your product."
The Impact of Product and Service Complexity on Business is available for download at http://www.georgegroup.com/complexity_latest.php.
About Knowledge@Wharton and the Wharton School
Knowledge@Wharton (http://knowledge.wharton.upenn.edu) is a free biweekly resource that captures knowledge generated at Wharton through such channels as research papers, conferences, books, and interviews with faculty on current business topics, and distributes that knowledge online to a global business audience.
The Wharton School of the University of Pennsylvania is recognized around the world for its academic strengths across every major discipline and at every level of business education. Founded in 1881 as the first collegiate business school in the nation, Wharton has approximately 4,600 undergraduate, MBA, and doctoral students, more than 8,000 participants in its executive education programs annually, and an alumni network of more than 80,000 worldwide.
About George Group Consulting
George Group Consulting (www.georgegroup.com) works with Global 500 companies to unify strategy and execution, providing new strategic insights and creating lasting value to the business. George Group is the recognized authority in the development and deployment of strategies for Conquering Complexity of product or service offerings. The firm's proprietary Fast Innovation approach provides clients with the first strategic and operational framework and tools to accelerate innovation and drive sustained organic growth. George Group is also the leader in Lean Six Sigma and has supported more global Lean Six Sigma operations engagements than any other consulting firm.
George Group is headquartered in Dallas, Texas, with teams of consultants based locally around the world to provide services to clients in more than 54 countries.