Companies want to grow, and one of their most common strategies for doing so is to create new products. These may increase revenues, but of course they don’t guarantee profits. In fact, product proliferation often reduces margins. One company we studied found that the bottom 40% of its products generated less than 3% of revenue, and the bottom 25% of its products were highly unprofitable.
A version of this article appeared in the April 2006 issue of Harvard Business Review.