The Hindu Business Line : Don’t get stuck in a drying-up profit pool bookmark

Customers and profit pools don’t stand still. This is the third law in The Breakthrough Imperative by Mark Gottfredson and Steve Schaubert of Bain & Company ( www.landmarkonthenet .com). Four drivers behind these shifts, as the authors identify are customer preferences, innovations, bargaining power and business environment.

Consumers “often switch brands or service providers to get a better deal or to improve their image somehow.” For instance, in the US auto market, the operating margins of GM, Ford, Honda and Toyota were within two percentage points of one another, in 1989. “Fifteen years later, Toyota’s and Honda’s operating margins were in the high single digits, while GM’s and Ford’s were zero.”

Good managers watch for potential shifts in profit pools and try to anticipate them. “But sometimes a company gets stuck in a pool that is drying up…” It takes a determined leader to move “even the largest of companies into a more productive pool,” observe Gottfredson and Schaubert, citing IBM. A must-read.

D. Murali

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