A company’s profit design starts with understanding that profitability is a result of managing and tracking a complex, interdependent set of components that contribute to the company’s financial performance.
Most CEOs understand the need for a business plan – a road map that identifies where they are going and how they are going to get there. Too many are not aware of the fundamental profit design of their business.
These are the powerful contributors to creating a profitable company that should be considered long before a business plan is ever introduced:
- Value Exchange. The profitability of your value proposition that defines why your customers buy from you and not the competition.
- Customer Intelligence. The informed awareness of who the customers are and what they want.
- Scope. The range of product or service offered.
- Business Development. The blend of targeting, capturing and caring for the customer.
- Strategic Control. The unique power of your offerings.
- Strategic Allies. The specific external partners engaged to expand sales.
- Knowledge Management. The manner in which a company leverages its unique knowledge.
- Culture. The landscape and focus of the human workplace community.
- Organizational Structure. The organizing of people to successfully complete tasks.
- Operating Systems. The support structure for critical enterprise processes.
- Research and Development. The continual discovery of solutions to the customers’ needs.
- Capital Intensity. The measurement of required financial resources.
How to Overcome This Challenge
Evaluate your own profit design. Identify where the company is doing well and find ways of capitalizing on those strengths. Then analyze areas of concern and utilize all stakeholders in uncovering activities within those components that will improve profitability.
Critical Questions to Ask
- Does the company have a clear growth strategy?
- Does the company have a defined, well-articulated profit model?
- Do all employees understand how your product/service solves your customer’s problems?
- Are all your employees clear about the company’s strengths and weaknesses?
Profit design creates the profit architecture of your company. Not constantly probing for what is driving profits, what is driving revenue groups, and what is motivating employees can cause a company to flounder.
Focusing on a company’s profit design will go a long way toward helping a CEO stay ahead of the challenges outside his/her control. Building a solid foundation where profitability is based on the 12 profit design components ensures stability even through changing economies.
Need help with this topic or leadership coaching? Contact Mission Critical Teams.