It’s widely known that big companies can be very complicated, and this complexity requires skilled management. Managers often thrive on the challenge and intellectual stimulation it brings. However, is embracing complexity truly the best path to success for a company? Many believe that the more products a company offers, the more profit it should generate.

In reality, internal complexity carries significant hidden costs. A broad product range entails more complex logistics, increased salespeople training, and greater administrative work compared to a narrower range. These factors drive up the overall company expenses, potentially surpassing the additional revenue from extra products.

On the other hand, simplifying your business can lead to cost reduction. When you narrow down and concentrate on a select range of products, every member of the company can fully focus on these key items. This allows for a deeper understanding of these critical products compared to managing dozens of them. Furthermore, it simplifies administrative tasks and leverages economies of scale, benefits that come from doing more of the same thing, particularly in production and logistics.

The value of these benefits is evident. For instance, a study of 39 medium-sized companies revealed that the least complex ones were the most successful. They sold a narrower product range to a smaller customer base, had fewer suppliers, and, as a result, enjoyed higher profits. Clearly, by simplifying your business, you can cut costs and increase profitability.