The Profit Zone
How Strategic Business Design Will Lead You to Tomorrow's Profits
By ADRIAN J. SLYWOTZKY and DAVID J. MORRISON with BOB ANDELMAN
MARKET SHARE IS DEAD
The number one problem in business today is profitability. Where will you be allowed to make a profit in your industry? Where is the profit zone today? Where will it be tomorrow?
The profit zone is the area of your economic neighborhood where you are allowed to earn a profit. To reach and operate in the profit zone is the goal of every company.
You've been told how to get there. "Get high market share and the profit will follow." "Get high growth and your profits will expand." As a manager, you were schooled in how the pursuit of market share and growth automatically places you on a direct route to business success.
However, these formerly direct roads have become mazes riddled with traps, wrong turns, and dead ends. Many large companies, after taking the turn toward market share and volume growth, have only hit a profitless wall.
martes, octubre 11, 2005
Dialoguemos: Shifting Electric Sector to Profit Zone
In several post I have said that the electric sector of DR is in the No Profit Zone. Below you will see where that concept comes from. I contend that the deregulated electric power industry worldwide, where only wholesale competition is allowed is placed in the NO PROFIT ZONE. The reason is simple: the business models of the competitors are just about equal, because no body wants to take risks. The result is: no pain, no gain. However, retail competition business models are just starting to become available for the industry as a whole, based on real competition by separating the monopoly wire side from the generation and comercial competitive side. There is a need to "Upgrade poorly performing neighbors (distributors/comercializators) who block your (generators) ability to create value (for the customer)."
An artistic rendering of loop of the system dynamic structure of the DR power followsj showing a highlight of the systemic crises. I believe that there are several vicious circles destroying value leading to the NO PROFIT ZONE. One set of causal links of the local vicious circle is: in the name of low rates negotiated (by the intermediary regulator) for the customers, government takes high risk negotiating at a knowledge disavantage with agents; after a delay government raises taxes and transfer risk to tax-payer; tax-payer are customers whose real rates increase. This process have been going on for many years, with costly delays. Subsidies, customers gen-sets, theft, ... have all increased exponentialy. The result is a collapse process. By taking the government out of the negotiaition process and letting generators, retailers and customers share risks among themselves, without much delay introduced with high technology, the new dynamic structure of the system will lead to the PROFIT ZONE.