The Profit Zone

Summary Written by Karen Reyburn

The Big Idea

Money, Hours, and Hassle

"To begin customer-centric thinking, managers must reverse the traditional value chain…so that the customer is the first link in the chain."- The Profit Zone, page 20-21

The principle I found the most striking (and it’s in the first chapter!) was that if you are to understand your clients, you need to reverse the value chain the way it has always been understood. The traditional value chain starts with the company’s assets or core competencies – what you’re good at – and ends with the customer.

The Profit Zone happens when you turn that on its head, and start with what the customer really wants – and work through the chain to develop your core competencies around that. The problem is, you can’t figure that out by surveying your customers, or even doing ‘market research’. (That’s wonderful news for some of us – did you really want to pay expensive market researchers?) You figure out the things that are so important to customers that if they can’t get them, they’ll switch suppliers. Some of these will be spoken – many are silent.

The critical economic formula comes down to three things: the money, hours, and hassle that the client will ‘pay’ for buying or using your product or service. Looking at how you save your customers money, or hours, or hassle – or all three – will be a light bulb moment for your business design. But that design should not remain static…

Insight #1

Re-Invent Your Business Design Every Five Years

"The single biggest problem in business is staying with your previously successful business model… one year too long."- The Profit Zone, page 14

The business model – which is where the profit zone comes from – is not static. It’s not something you set up when you begin your business, and then just make a little better, every day. If you have any hope of staying power, you’ll change. Often.

This is where the modern business (one that was probably hardly imagined in Slywotzsky and Morrison’s day of penning this book) can come into its own. If you’re smart, you’re already changing constantly. Need to share files? YouSendIt. Oh- nope – that’s already outdated with Dropbox. Oh again – now it’s Google Drive. It used to be that technology changed with every revolution of the earth….now it’s with every revolution of the moon. If you’ve embraced change, and social media and a constantly-connected mobile world, you’re better placed to be changing the way you do business, too. “The reinventors know that the game is never over.”

So the first thing you can do is say to yourself, “My current business model is probably outdated”. That will save you years of heartache learning it the hard way.

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Insight #2

Ask Yourself, "What Am I Afraid Of Finding Out?"

"Don’t spend your time with customers who like you. Seek out the customers who are the most demanding, the angriest, and the most insightful about tomorrow."- The Profit Zone, page 22

Putting the customer first may just roll off your lips as a nice phrase, but reading this book should change entirely how you do that. As mentioned above, you don’t primarily focus all your efforts on surveys, or fancy research, because the customer is not always the one who truly knows what he (or she, or they) want. Look at Apple. They’re constantly coming up with new ideas that half the world complains about, or pretends they didn’t want, or insist that someone else is already doing. But every second person I see has an iPhone. Or when Facebook changes its news feed for the seventeenth time, even though complaints rage high, they’re using Facebook itself to lodge them. And eventually things die down and people continue using it.

So it’s your job to find out what your customers really, truly, deep-down want: and the suggestion the Profit Zone makes is a scary one. To pick out the aggressive, the angry, the complaining, the most switched-on ones – and spend your time talking and listening to them. (On a personal note, I must say that this method has real value. The customers who ‘do my head in’, to use the phrase, are always the ones who cause me to rack my brain for a new way to do things.) And when you go into these customer dialogues, remember that it’s not about you. It’s not about finding out new information so you can have a profitable business and get into that magic zone. Ask yourself, “What am I afraid to find out?” – because this will give you all the clues needed to change your root business design, and capture tomorrow’s profits.

Here’s my recommendation. Buy the book, and read the first three chapters. If you read the others that’s fine, but the first three should change your business life. Get an old-fashioned pen, and underline the bits that stand out, and take notes within the book. The notes I made in my copy completely changed our business design a few years ago – and happily, we just changed it again a few months ago.

Read the book

Get The Profit Zone on Amazon.

Adrian J. Slywotzky

Adrian Slywotzky is a Partner of Oliver Wyman, a leading global management consulting firm. Since 1979, he has consulted to Fortune 500 companies from a broad cross-section of industries, working extensively at the CEO and senior executive level for major corporations on issues related to new business development and creating new areas of value growth.

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