There is a constant stream of business fads and approaches, but a good general manager will conduct a hard-nosed, comprehensive review of the business to identify the most critical areas for improvement. Bain & Company has developed a full-potential, performance improvement diagnostic framework that points the way. It starts from our understanding of the four critical variables in any performance improvement undertaking: costs, market position, changing customer behaviorsand–perhaps the least understood–complexity.
We help firms attack complexity in order to serve customers better. Our research shows that companies with the lowest complexity grew 30 percent to 50 percent faster than their average competitor. High complexity is often a symptom of a larger problem, such as poor understanding of customers' needs in the case of product proliferation or poor accountability and decision making in the case of organizational complexity. Tackling the root cause pays off handsomely. For example, by providing the right level of product variety, companies can grow revenue by 5 percent to 40 percent while reducing costs by 10 percent to 35 percent.
What results can you expect? Our diagnostic work leads to tangible goals and ready-to-launch initiatives to achieve them. As an example, one company we helped through such a diagnostic process targeted–and achieved–these concrete objectives:
- Reduce costs by $200 million to move relative cost position from 110 percent of best competitor to 90 percent.
- Increase relative market share from 0.9 to 1.2; move share of high-profit segment from 40 percent to 60 percent, with a customer retention increase of six percentage points.
- Increase share of profit pool from 40 percent of $2 billion to 70 percent of $2.8 billion by expanding into a downstream service business in the most profitable product segments.
- Cut SKUs from 100,000 to 2,000; reduce organizational layers in SG&A from five to three; outsource 20 percent of all G&A costs.