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A Special Edition for the Financial Services Global Leadership Summit, 2008
CHANNELVolume 005 Issue No. 01
Giving Wings to Opportunity
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The Ps in Profitability
Preface
Successful businesses no longer
aim at survival based on volumes
and have begun focusing energies in
defining and meeting profitability
goals. This article ponders on the
facts, pursues the trends, and uses a
small pigment of imagination in an
attempt to paint a precise picture
on profitability.. A large percentage
(about 70 percent) of these parameters
impacting profitability --- aptly referred
to as the P’s in profitability --- are being
adopted by large and small enterprises
in varying degrees, while the remaining
are already in place and will continue
to be an intrinsic part of profitability
improvement endeavors. While the
concept of profitability is not new, the
approach to achieving profitability
can vary depending on the parameters
selected. The pundits focus on each
aspect using different measurement
yardsticks. However, the bottom line
is that each of the Ps is an important
contributor to profitability.
Preparation
The key to the success of any initiative
is preparation. Firstly, by distinguishing
the controlling parameters of
profitability and, secondly, by measuring
these parameters and identifying gaps
in processes, multiple support groups
and systems. This creates the basis for
ongoing monitoring, improvement and
tracking. Impromptu decision-making is
now considered passé, with the need of
the hour being meticulous preparation.
The key to the success of any initiative is
preparation. Firstly, by distinguishing the
controlling parameters of profitability and,
secondly, by measuring these parameters and
identifying gaps in processes, multiple support
groups and systems.
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4. CHANNEL VOL. 005 ISSUE 01
Plan
All data collected during the preparation
phase is considered carefully before
putting together an action plan. This
plan includes factors such as process
implementation and improvement,
resource requirements, systemic changes
and automation needs. The plan
will need to be prioritized based on
time-to-deliver, the complexities and
challenges (those within our control
versus external factors/groups) involved,
and their impact on profitability.
Alternative plans and recommendations
help in decision-making and faster
implementation. Gone are the days
when a plan only defined the golden
path of execution; today, it is expected
to incorporate alternatives and
recommendations, including cost-benefit
analyses covering what-if scenarios for
better decision-making.
Processes
Processes help streamline and sequence
tasks and operations. They identify
and correct gaps and/or redundancies.
Process improvements bring about
operational efficiencies - these are
needed at every level within and outside
the team, group, and organization.
Operational effectiveness reflects on
various aspects and phases, sometimes,
having a ripple effect on various
sub-processes and, in turn, resulting
in improved profitability. The link
between process and profitability
is slowly establishing itself. Various
process models adopted range from
the Six Sigma Methodology to the SEI
CMMi model and ISO standards. The
CMMi Process Maturity Model includes
planning, engineering, and managing
software development and maintenance
and practices, which, when followed,
enhances an organization’s ability to
streamline cost, timelines, functionality
and quality. On the other hand, the
Six Sigma Methodology improves any
existing business process by constantly
reviewing and re-tuning processes using
what is known as the DMAIC (Define
opportunities, Measure performance,
Analyze opportunity, Improve
performance, Control performance)
approach, providing a near-ultimate way
of ensuring high quality and superior
performance. In short, these models
improve processes, resulting in increased
operational efficiency, productivity
and quality.
Performance
Individual performance is measured on
the basis of how much and how well
one delivers towards a pre-defined set
of objectives. Group performance is a
measure of how well individuals work
together as a team, which in itself
constitutes a number of parameters
such as quality and timelines of a
deliverable, and effective utilization
of each member of the team, among
others. Organizational performance
includes process automation at all levels/
phases, improved data capture, and
access to current and historical data
for better analyses and corresponding
enhancements. Building up performance
in each one of these areas can impact
profitability.
People
While the ‘people’ factor may seem
implicit and redundant, it has
intentionally been kept distinct from
the other factors affecting profitability.
Mapping the right individual profiles
to tasks – and the changes expected
therein – and then managing people
and their time; optimizing the usage of
their skills; motivating them to ideate,
Process improvements bring about operational
efficiencies. Operational effectiveness reflects on
various aspects and phases, sometimes, having
a ripple effect on various sub-processes and, in
turn, resulting in improved profitability.
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5. 65
innovate and be proactive; helping them
assay multiple roles, and improving
teamwork - these are all different
aspects involved in achieving the
objectives of profitability. In a nutshell,
without people playing their respective
roles in the machinery, projects would
just not move, and one would never
attain the desired results. Organizations
have understood the importance of
people in profitability improvements
and are steering themselves - and their
policies - towards employee satisfaction
and retention initiatives.
Passion
An obvious personality trait is passion.
It can create a positive environment,
propagating a feeling of abundance and
multitude. The many consequences to
being passionate include an individual,
‘going the extra mile’ and surpassing
set standards and objectives. All in all,
passion, zeal, enthusiasm and fervor
are infectious qualities, creating an
excitement that is difficult to contain.
Passion is the required stimulus for
an organization to meet and beat
profitability expectations. While this
is a relatively uncharted area, it will
soon gain the necessary importance it
deserves.
Progressive Thinking
A single attribute that makes people
stand out from a crowd is their ability
to think differently. Classified under
the umbrella of progressive, out-of-the
box, unconventional or lateral thinking,
it helps creates the desired edge in a
competitive business. While this kind of
thinking is generic enough to act as an
advantage in any aspect of life, it does
not lessen its significance and influence
on profitability.
Protagonists and Pioneers
A pioneer is a progressive thinker who
treads new paths, breaks new ground
and revolutionizes traditionally-held
perspectives and the working ethos.
Pioneers change or define the way
businesses are conducted, a fact
well-established today with the
proliferation of new-age entrepreneurs,
but their potential to directly influence
profitability, hitherto unconnected, is
definitely worth exploring.
Positive Thinking
Negativity can prove detrimental to any
task, team or organization. A healthy,
positive outlook does not just offset
negativity but can actually reverse its
impact and create positive energy. This
energy then charges the environment
and makes it conducive to better
throughputs and higher productivity.
This line of thinking is fast gaining
acceptance in the industry today, with
many organizations investing efforts in
creating a positive environment.
Perfect versus Passable
While the need to strive for perfection
may seem an obvious objective of
any business, it is surprising to note
that many organizations go through
similar motions and changes, accepting
passable levels of processes, systems and
competence. Perfecting a task – and the
numerous attempts underpinning it – is
a big step towards profitability.
Packaging
The most significant aspect of packaging
is its inherent reuse capability.
Packaging or building intellectual
property in the form of a product yields
returns over time through multiple
sales of the product. On the other hand,
packaging into reusable components
and/or solution accelerators provides
an impetus for faster time-to-market,
while also significantly reducing costs.
Value-based pricing is then applied,
wherein the offering is priced based on
the value perceived and the solution’s
impact on the customer’s profits and
returns. Services and solution-based
organizations are increasingly leaning
towards this model in order to stay
competitive and yet be profitable in the
market.
Price
Price, seemingly one of the simplest
of factors, has the highest degree of
influence on profitability. While other
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6. CHANNEL VOL. 005 ISSUE 01
parameters affect the bottom line,
price has a direct bearing on top-line
growth as well. Simply put, with
everything else being equal, higher the
price, better the profitability. There
is another school of thought (and a
successful business model) that adopts
the policy where increased volumes
achieve higher profits, even though they
are accompanied by lower margins and
percentages. Many organizations focused
on the volume-business model are now
reassessing their business models and
moving towards higher pricing models
in an effort to meet the stress and strain
associated with market volatility.
Patience, Persistence and
Perseverance
With all that has been said about
improving profitability, the fact remains
that none of it is achievable without
patience and perseverance. Each of the
parameters described above requires
investment in terms of effort and, more
importantly, time. Without patience, a
Farhad Merchant
Senior Manager
Strategic Initiatives
PrimeSourcing
i-flex solutions
number of initiatives die a natural death;
a lot of creative ideas that started with a
lot of enthusiasm and passion, end up in
a black hole. Along with patience, one
must have the necessary persistence and
perseverance to help scale the pinnacles
of profitability improvement.
Partnership
The right kind of alliances and
partnerships can help organizations
collaborate and work towards common
goals. A partnership can help de-risk or
hedge the costs of adding resources to
perform tasks in the short term. It can
also open up new doors and thinking by
leveraging an existing and established
framework. Acting as a launch pad,
such alliances can increase cross-sell
opportunities, thereby, reducing the
initial effort and cost required to tap
into new opportunities. Partnerships
in the form of mergers, acquisitions,
joint ventures and alliances are a clear
indication of what the future holds.
Paradigm Shifts - Staying flexible
While paradigm shifts are a given in
today’s world, staying adaptable and
flexible amidst a constantly changing
environment will ensure continuous
growth. This calls for the need to
‘provoke’ minds and create a philosophy
of ‘simulating scenarios to stimulate
the mind’. Such a viewpoint can force
people out of their comfort zones and
prompt new and different lines of
thought. These ideas, then, need proper
channeling to bring about the desired
improvement. In a market scenario
where unknown factors take precedence,
flexibility is key to ensuring future
profitability.
Pragmatic
Last but not the least is the need for a
pragmatic approach. No matter how
persistent or positive your attitude, and
even with infinite patience levels, the
practical aspects of any idea cannot be
ignored. The foundation for profitability
is to ‘Dream big but be practical’.
Packaging or building intellectual property
in the form of a product yields returns over
time though multiple sales of the product.
Packaging into reusable components and/or
solution accelerators provides an impetus for
faster time-to-market.
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