How to Estimate the Optimal Variety of a Product Portfolio a Case Study in the Industry of Cutting Tools

Product proliferation is a way for a company to increase its market share and sales, which should support this economic performance. Rathnow predicted that too much variety in a company could lead to costs rising faster than revenues. This complexity crisis has been observed in many industries for many companies.The first contribution of this study is to observe, in the cutting tools industry, companies that are managing the complexity of their portfolio beyond the complexity crisis predicted by the model of Rathnow. We observed that, as predicted, during the complexity crisis, revenue and economic performance can be reduced as variety increases. For complexity masters, beyond the complexity crisis, the relationship between variety and economic performance becomes paradoxically proportional again.The second contribution of this study, based on this observation, is to propose a methodology to plan, implement, monitor and adjust a proportional relationship between diversity and economic performance