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What the unit price doesn't reveal.
60–80% of a product’s lifecycle costs are determined by architectural and variant decisions, not by the unit price.
What this means in concrete terms: Two control units with similar hardware costs—one based on a platform architecture with standardized interfaces, the other adapted for a specific customer with its own software logic, test suite, and qualification process. This effort is repeated with every model generation. The TCO difference (total cost of ownership): 30–50%. This is not visible in purchasing, but is rooted in the architectural decision made years earlier.
Total Cost of Ownership (here not from the customer’s perspective, but from the manufacturer’s): this highlights the total cost to the company over the variant’s entire lifecycle. This includes not only the part price, but also one-time investments required to make a variant production-ready, as well as ongoing costs throughout the entire lifecycle: variant-specific rework, software maintenance, spare parts, maintenance, and engineering costs resulting from late changes. The further a variant deviates from the platform standard, the higher the CAPEX and OPEX become.
The result is a decision-making framework: not a checklist, but four questions that must be asked for every new variant: Does it permanently increase the number of variants? Does it create new dependencies on other modules? Is it reversible? And do the benefits outweigh the lifecycle costs?
I have developed a simplified model for this purpose—one that is suitable for management and can be applied quickly. It helps answer a specific question: Should we introduce this new variant, and at what cost? Portfolio streamlining also requires a systemic analysis of network effects. If you’re interested in the model, feel free to reach out.
Modular product architecture is the structural answer to complexity costs. More on this in the post after next. The further a variant deviates from the platform standard, the higher the CAPEX and OPEX become.
20% of your products cover the rest - and the rest costs more than it brings in.
Variant diversity rarely arises from a conscious decision. Every new customer requirement, every market adjustment, every “let's just quickly build that” adds up. At some point, the question is no longer whether the diversity is manageable, but when it ceased to be so.
This becomes particularly evident during the consolidation phase of the automotive industry. What was cross-subsidized in good times now stands without coverage. The question “Which variants are actually financing us?” is a burning issue for many companies right now.
How do you recognize the tipping point? Development projects always take the same amount of time, no matter how much experience the team has. Purchasing, quality assurance, and logistics lack resources because the supplier base has grown with every variant, many of which are immature, few of which are profitable.
The real problem only becomes apparent in the numbers. The Pareto curve makes it clear: 20% of the variants generate 150 to 300% of the profit. The rest are value-neutral or destroy value. This is not a marginal phenomenon; it is the structural result of uncontrolled variant diversity.
What helps: a complexity strategy that actively manages diversity. And reduction in big steps, not small ones. Those who negotiate individual variants reinforce the pattern. Those who replace an entire generation of components break it.
Three questions that almost always come up:
“Which ones do we eliminate without losing customers?” The Whale Curve answers that—not gut feeling, but profitability analysis.
“Sales sells every order.” As long as sales is measured by revenue and not by contribution margin, variety will continue to grow.
“We tried that three years ago; it didn’t work.” Almost always, the reduction was too incremental. Reducing complexity requires the courage to take big steps.
The Whale Curve alone—that is, the analysis—is only the first step. Combined with a total cost of ownership approach and complexity management, you can reach the profitable zone and stay there. Contact me if you’re interested in the methods and models.
