accelerate growth in cash flow and operating value
the problem is …
most businesses are inadvertently investing in, and growing, areas with low or negative cash profitability
Market Strategyimpacts Cash Flow and value more than any other part of business strategy …
Cash Flow drives business value …
… and Market Strategy impacts Cash Flow far more than other management levers
… but most businesses do not orient decisions around CASH profitability.
Look at this technology business, investing to grow products with big revenues; not knowing where real (cash) profitability is …
typically, growth investments are driven by revenues and market position, rarely on profitability of specific parts of the business...
businesses that pay attention to profit use GAAP measures (GP and OP), which actually mislead when compared to real, cash profitability (EP)
… because they have such poor visibility into what is actually profitable.
GAAP distorts the profit picture:
GAAP-based systems report performance, but do not report real profit; they include large non-cash and tax adjustments, working capital changes, allocations, etc. - ultimately misleading managers
The right information is simply not available:
Views of cash profitability by customer, channel, offering, and geography are not available; granularity is very insufficient, expenses are poorly allocated and competitor / partner information is limited
The right skills are not at right place:
Finance and Marketing maintain very different and separated skills; Profit Pool based market strategies require an integrated blend of both disciplines
Management does not focus on Profit Pools:
Without continuously investing in acquiring an accurate view of Profit Pools are, management is left with making decisions without the guidance of key facts – or worse, using other (misleading) measures
