Smart complexity

Purpose – For many firms the problems of manufacturing, marketing and distributing a complex product line persist, and it is driving up costs in an economy where cutting costs is essential to survival. This paper aims to promote the innovative concept of “Smart Complexity.” Design/methodology/approach – This paper explains how a firm can adopt this new complexity management concept. It is an approach that challenges the notion that every new product variant drives growth. Findings – Recently, a company that adopted this approach increased margins by 1 to 3 percent and set the foundation for ongoing improvements in profitability. Practical implications – This four‐pronged approach to complexity management starts with consumer research to find the right level of variety. It adds richer SKU‐based data on costs across each step of a newly transparent value chain. It brings this data to a cross‐functional, integrated decision process. Finally, it implements process changes to ensure complexity is governed and managed over time. Originality/value – The leadership lesson: desirable complexity drives consumer buying decisions. Undesirable complexity unduly complicates internal processes without making a whit of difference to the consumer. The new concept of Smart Complexity distinguishes between the two.