Innovation versus complexity summary

Companies are involved in incentives focused on innovative in new-product development. This is in terms of Introduction of distinctive offerings being often the easiest way for the completion of shelf space, market share protection. There are dramatic stories from the press about the brands and product categories that intrigue the managers and investors. This encourages the managers to focus on product development in the organization. These new products are developed through the innovations in the company. The initiatives that are aimed at increasing the innovations in the company have a related impact of stagnating profit. This is due to the amount of capital that in invested in order to fund the projects aimed at developing a given product.

The product development, which facilitates the increase of a wide variety of products to be offered, leads to the company complexity. The continuation in the activities of launching new products, which are developed though innovation, will result to the company being involved in more operations that are complex. This increase in complexity has an associated cost to the company. This raises the operating expenses of the company, which in turn results to a decrease in the profit.

The complexity also involves the spreading of the product line through the company operation. However, the company may wish to get lid of the complexity. These efforts aimed at the reduction of complexity may not be effective since there will still be complexity latent in the value chain. Complexity is also associated with infecting the company with things like unreliable economic date, unrealistic sales expectation and entrenched assumptions. Therefore, to some extent the increase in the level of complexity leads to the complications in the company.  

The use of the innovation fulcrum can assist to establish a simplified way of developing the business. This involves an establishment of a good balance between innovation and complexity. The innovation fulcrum has become a tool for various companies to facilitate the achievement of higher profits and sales. The fulcrum can be developed in a company though two processes. The Model T analysis is the first method that is used for determination of a zero complexity baseline. This includes the cost of selling an absolute minimum number of standard products. 

            The next step involves addition of a variety of back into business systems, product-by-product, and carefully forecasting on sales and the cost effect across the chain value. If the results indicates that the cost is beginning to overwhelm the added revenue, it is an indication that innovation fulcrum have been established. The complexity reduction efforts can fail to break the organization resistance. The baseline enables the management to focus on the existing company’s complexity. This complexity is a challenge provided the processing of costs by the financial reports.

            Conclusively, the summary has explored the things that are involved in the company’s innovation and the way it leads to complexity. It also explains on the various effects of the complexity to the company. The summary also establishes the solution for the problem by which is finding a balancing point between the innovation and complexity. These are done through the two processes, which are also explained in the summary. Therefore, increase in the complexity alone has a negative effect to the company. However, there is the need of integrating it with the innovation through the balance that facilitates the establishment of the simplification of the business.