In today’s highly competitive market, minor differences end up being the only distinction between you and your biggest competitor. Consistent top line growth isn’t enough anymore, with increasing pressure to focus on profitable growth and improvements to the bottom line.
In my meetings with customers over the past few months, I’ve noticed an emerging shift: profitability matters more than revenue. This trend is having interesting ramifications on the way companies are doing business, from the way they compensate sales executives to the way they invest in business development and expansion.
Leaders across the organization understand that profitability is more than a yes or no question – it’s a complex inquiry with multiple variables: which customers are renewing, what product is having quality issues, how is the above average temperature affecting occupancy rates? In order to consistently hit profit expectations, it requires a mindset shift across the entire organization.
People closest to the business operations need visibility into the key drivers of profit and their interdependencies. They also need to be able to quickly see the magnitude of change when drivers change. What’s the impact of a $.02 change in the price of fuel? Does an increase in volume for a specific customer have a positive or negative impact? What are all the costs associated with ramping capacity to support the increased volume?
To drive a culture of profitable growth, business leaders need analytics that give them visibility into what matters and why. They also need to be able to do more than just view information– they have to be able to act on it. Instead of waiting on margin analysis from the finance team, sales execs need to be able to see all the levers that impact profit and model adjustments in real time during the negotiation with a customer. Procurement needs to be able to tweak contract terms during vendor negotiations and see the resulting impact to profit.
How do you start to transform the way your organization thinks about profit? One very powerful way to start is by telling the story. Understanding profitability requires more than just data; you also need the narrative that provides context – conversations, actions, assumptions, and events. Telling the story in a way business leaders can easily understand allows them to quickly move from strategic insights to influential actions.
As people in the business get more involved in profitability, you get a more accurate perspective on how the business will perform. More importantly, you drive accountability for reaching your profit goals to the people that make the decisions that ultimately impact profit.
How do you tell your profitability story?