Simplicity Wins

Behind the international reputation of such German companies as Daimler-Benz, BMW, Siemens, Bosch, and Krups are hundreds of highly successful mid-sized companies that build the components that make the cars, computers, and coffee makers the world wants to buy. These companies — the Mittelstand — account for half of Germany's GNP and have created almost all that nation's new jobs in the past decade.

Simplicity Wins is the product of a five-year examination of these mid-sized firms and a companion study of similar U.S. companies, whose findings supported the German results. The top performers among the German group had growth rates four times higher, productivity 25 percent greater, and return on sales three times higher than those of their weakest competitors. What is the secret of their success? In a work, simplicity. These leading firms firms produce a narrower range of products, sell to fewer customers, and have fewer suppliers. They have decentralized organizational structures, simpler and faster processes, and a more concentrated focus on R&D investment, logistics, and location structure.

Simplicity, according to the authors, is not an answer but a process. They describe how high-growth companies use simplicity to keep a "winning wheel" of superior performance turning. Rigorous implementation of simplicity leads to the achievement of clear strategic differentiation in value to the customer and operational excellence in cost, time, and quality. These in turn can bring sustainable corporate success. As measured by a combination of market share, profit, growth, customer loyalty, financial strength, and image, such success enables future-oriented investment in new products, markets, and people. And the cycle repeats.

Linking simplicity to high performance runs counter to the common corporate practice of creating internal complexity — developing multiple line extensions and integrating backward and forward, for example — to meet the increasingly complex demands of the marketplace. Nor is downsizing the answer: the high-growth companies instead achieved simplicity through selectivity and concentration of resources. Most encouraging, the authors' findings affirm that there are no "bad" industries. That is, for any company anywhere in the world, which industry you compete in is far less important than how you compete.

A blueprint for superior performance, Simplicity Wins will encourage industry leaders who have already embarked on the path to simplicity and inspire those who have yet to set out.

• Introduction
  Excellent Performance and Simplicity

1. Product Range and Customer Structure
   Concentrating on Core Areas and Delivering Optimum Customer Value
2. Vertical Integration
   Expanding In-House Strengths, Integrating Key Suppliers
3. Development
   Minimizing Risk with a Strong Upstream Focus and an Integrated Approach
4. Logistics
   Simplicity through Differentiation
5. Technology
   Simplification before Automation
6. Organization
   Transparency and Entrepreneurship
7. From Concept to Program
   Putting Simplicity into Practice

• Postscript
  A U.S. Comparison

Expect some Germans to try to make everything extremely boring and try to explain everything by statistics. It is stuff like this that makes management consultants look bad (in this case, McKinsey). Wastebasket.