If you eat one or more of the 100 distinct products made by the Mars Co., including Snickers, M&M’s, Twix, and Dove Ice Cream Bars, you are consuming the same three ingredients (chocolate, sugar, and nuts).
They use those three ingredients to make just about everything they produce and sell.
Mars knows what it means to leverage economies of scale. That’s a business school way of saying they use a core set of ingredients to create dozens of distinctive products to match consumer tastes.
Pepsi Co. does the same thing. They incorporate three core ingredients (corn, sugar, and potatoes) to create dozens of snacks and beverages.
Taco Bell creates more than 90 products from its set of 7 core ingredients (tortillas, ground beef, beans, cheese, lettuce, tomatoes, sour cream, and hot sauce), all with their own names and price points.
In the personal care space, Johnson & Johnson utilizes a variety of fragrances and a core set of elements (glycerin, mineral oil, parabens, petrolatum, and sodium lauryl sulfate) to formulate more than 100 products, ranging from baby care, skin care, and deodorant.
Apple, Sony, and Tesla, among many others, use a core set of concepts, integration principles, and design elements to make a diverse set of products that embody those core principles.
The point should be painfully obvious by now.
Many of the best companies in the world focus on a core set of ingredients, elements, or ideas that they combine into a diverse set of products or services.
They do this for more than efficiency. When a company relies on a small set of critical ingredients or elements, it can get very good at sourcing or producing them at the highest level of quality, with the greatest consistency, and at the lowest cost.
Even more important, they get to nurture, develop, and innovate on a smaller set of elements, which allows them to be better than competitors that focus their efforts on a wider set.
Every enterprise can benefit from economies of scale, and good leaders do their best to find that foundational set of components that can elevate quality and reduce costs.
What competencies, core ingredients, critical skills, or essential elements does your enterprise depend upon? Can you point to a small set of elements that are more central to everything you do or stand for? Do you leverage this set of ingredients to achieve economies of scale?
Think about how to create new products, services, or offerings from the same set of factors you and your team are best at. The efficiencies this approach offers have a host of benefits, not the least of which is a hyper-focus on quality.
Leaders rarely improve quality by cutting costs, but economies of scale prove that they can cut costs by improving on quality.
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