Empirical observation and comparison of product portfolio till the complexity crisis and beyond: case study in the cutting tool industry

To boost revenue and achieve economies of scale, companies often expand their product offerings. Over time, some manufacturers lose control with an excessive number of products, which leads to overwhelming costs. To identify the optimal balance between complexity and its benefits, merges complexity management. This paper proposes a novel methodology for observing the relationship between economic performance and observed variety by quantifying the product portfolio. Thus, a preliminary case study was conducted in the cutting tool industry, leveraging open data representing over 50% of the global market within this sector. A further contribution is the observation of a new domain beyond the complexity crisis. Two toolmaker companies have been observed to have designed, produced and sold more than 80,000 distinct products, while maintaining an operative margin higher than 20%. These enterprises can be designated as ‘complexity masters.’ This is of particular interest as no such examples have been documented in the extant literature. The counter-intuitive finding of this study is the proportional relationship between economic performance (revenues and operating margin) and observable variety, despite the common association of complexity with non-linear phenomena. This new state-of-the-art research study has yielded several managerial implications and has also generated ideas for further research.