Biz Machine

Accelerating Profitability is a Companywide Effort

By Dino Eliadis

Accelerating profitability means more than just cutting costs and reducing head count. While these strategies give you short-term increases in profits, they will eventually lead to slowed growth and reduced revenue. These strategies are defensive postures. They are used to dig in and entrench companies. You use these tactics like a turtle uses its shell – as protection against predators. When you use defensive tactics, you are making a statement that your company is prey to the outside environmental drivers that affect your business.

Accelerating profitability is done by creating better value for all the people in your value-chain to create and sustained better loyalty. These are long-term offensive strategies that cause business growth, increase revenues, and, when well managed, accelerate profits. You use these tactics like an eagle ensnares its prey - carefully and selectively searching out your target, and then with split-second precision seizing the opportunity. Before you can begin writing your plan you must answer these 2 questions from 3 distinct perspectives or dimensions. I call these the 3-dimensions of your vision. There is no set order to these dimensions, but you need all 3 or your vision will be incomplete and less effective.

A key factor in this entire philosophy is that of the value-chain. But what is a value-chain? Your value chain is defined by Handfield and Nichols, 2002 Financial Times Management as “A connected series of organizations, resources, and knowledge streams involved in the creation and delivery of value to end customers.” So, in a nut shell, it’s all the things you do to deliver your product or service to your customer!

Don’t blow over this simple concept, because the best plans really are the simplest ones. It has been my observation that businesses often search for sophisticated ways to accelerate their profits when all it really takes is delivering better value to your customer. And, with our definition of value–chain, there are an infinite number of ways we can achieve that result!

The reason that I started this article the way that I did is because too many companies say they want to increase profits and try the defensive approach to get there. Defensive strategies are internally focused. To get sustained, long-term growth we must look outside the organization first – to the customer.

Why to the customer first? Because your customers hold the key to everything that follows. Changing your business is a given. Remember the definition of insanity, “doing the same thing over and over, expecting a different result.” So, if you have to change, make sure it’s the right change. Let your customers tell you exactly what they want, and then make all the changes to your business based on their requests.

Let’s take a simple example. You own a coffee shop located along a major roadway that leads into the main business district. You offer quality coffee and breakfast rolls for a competitive price (just like every other retail business opened at this time of the morning). So, what could you do differently to grow your business? This is a trick question and it tricks most business owners. They start brainstorming ideas to make themselves different – that is the trap!

You need to survey your loyal customers to understand why they stop at your store instead of the convenient store or local gas station. They will tell you, you just have to ask. Now, you know what makes you different in their eyes. Begin to promote that aspect of your business and you’ll get more business from similar kinds of customers.

But wait that’s not all! This is usually where business owners stop and that is why they don’t see the long-term sustained growth that they want. Remember we said you need to consider all people in your value-chain. Now that you know how to get more customers, what other parts of your business are affected. This is what I call the Business Machine.

Your business is like a machine. It has many different moving parts (gears and motors) that make your business work. Typical business textbooks would call them departments (marketing, sales, operations, accounting & finance, administration, human resources, etc). But, you need to look outside these departments to your strategic business partners too. These include your suppliers, and channel partners that might resell your product or service through their business.

If you increase the number of customers that you get or how you get them will these other parts of your Business Machine be affected? You better believe they will. So, you must take these other aspects of your business into account when building your growth plan. Because it’s not just about getting more customers, it’s also about servicing them after you get them. If you don’t, it will only be a short lived growth. Eventually you will lose whatever ground you gained as dissatisfied customers.

With this in mind let’s go back to our example. You asked your customers and the common theme seems to be that they enjoy the one-on-one contact with the server, and the homemade freshness of everything. If you were to use these qualities to promote your business, do you think you would get more business? Sure, there are lots of “morning people” that like a friendly face to serve them instead of “pouring their own”. And there are lots of people that are worried about what they put in their bodies so “homemade” breakfast rolls would appeal to them.

But, could your operation stand an increase in business? How many customers could your current staff service? Do you have a lot of leftovers after the rush hour peak or would you need to bake more goods?Could your current profits sustain the increased staff and supplies you’d need to meet the demand, or do you need a loan or additional investment funding?

Hopefully you see how one little decision has a rippling effect across your Business Machine. So, make sure you’ve greased each gear before you try to accelerate your profits. Sit down and really think through your value-chain. Understand everyone involved and how what the customer wants affects you all. Make sure that your approach is not one-sided and takes both an internal and external view of your business. With this complete approach you separate yourself from the businesses acting like the turtle with defensive postures for short-term success. You will be set to strike the market like an eagle, accelerating profits with innovative solutions taking you to the next level of success with your business.