Complexity is often driven by redundant variety – i.e. variation in the product portfolio that does not add value to the business. Basically, to analyze the complexity we need to ask ourselves two simple questions:
- Do we offer the right product?
- Do we provide these products in the most efficient way?
Unfortunately, the answers to those questions are not that simple. The first question requires substantial market knowledge, analyses, statistics, and – very importantly – a well-defined strategy. The key to answering the second question is to consider the “fit” between the product design, the market demand, and the value chain. Product committees and project managers engaged in decision making are often burdened by the fact that a lack of overview is often a loyal companion to complexity. Thus, decision makers are forced to base their decisions on a patchwork of details without the big picture because they are not able to establish the overview required to do the job successfully.
Getting the Big Picture
An obvious task when trying to answer the two questions above is to try to establish an overview of the assets in the existing business. There is a series of different ways to gain such an overview. Several studies and practical cases from industry indicate that visual models can be a strong means to achieve an overview that can support decision making. At Worm Development we often make visual models that depict the whole product portfolio on a single (and – admitted – sometimes large) piece of paper. In these models we try to capture the essence of the business from four important viewpoints:
1. The Customer Viewpoint
Seeing the product portfolio from a customer perspective helps us when looking for redundancy and for the importance of various product variants and properties in the product range.
2. The Functional Viewpoint
Studying how the various customer demands have been turned into design concepts, and how these different concepts are different and alike. We often find differences on a conceptual level pointing towards similar customer specifications, i.e. the situation in which two different design principles fulfill the same purpose. Such a situation often leads to a lot of redundant variety throughout the organization, because the variation starts on a relatively high level and migrates down through the design and propagates to the production and procurement departments.
3. The Part Viewpoint
The part view is a detailed low level analysis of all the parts, bits and pieces in the product range. Often, we find different components such as screws, gaskets, O-rings etc. that are different for no reasons other than the fact that two different engineers looked at two different pages in the components catalog.
4. The Supply Chain & Process Viewpoint
Taking the viewpoint of the value creation makes it possible to see when the variation and complexity starts to explode throughout the supply chain. Some product designs entail a high variety early in the supply chain. For instance a few design changes can turn out to make it possible to swap two processes and thereby reducing variation in items in stock or perhaps even remove a stock completely.
Linking the Views
Getting an overview from these different viewpoints often gives hints on complexity reductions on a relatively low level. However, once you start to link the different viewpoints, you get a strong tool to identify greater improvement potentials. You can start to answer the two questions above, and really begin to understand why you have a complex portfolio and where to do something about it.
Later, when rationalizing the products it is important not to have a single-product focus. This will at best only lead to incremental improvements not nearly enough to secure successful implementation of any of the above mentioned later initiatives. The complexity analysis is a strong foundation for a multi-product initiative across a whole product range.
The Lean Paradox
Companies burdened by complexity are often tempted by initiatives such as lean production, just-in-time, build-to-order, etc. Unfortunately, many companies look intensely at their processes without addressing the product design. If the product portfolio is burdened by wasteful complexity, you will not get the full potential of the process improvements. An important first step before engaging in an implementation of process improvement initiatives such as lean should be to rationalize the product portfolio.
Thus, a first step in a lean process should not only be to make value stream maps and flow charts, but to also understand the product portfolio in depth, and get to know the strengths and weaknesses in order to address the complexity issues before changing the processes in the company.