Your company’s growth has flattened and profit margins are thinning. Naturally, the budget focus is going to be on cost cutting and efficiency. HOLD ON! Was your company built by cutting costs? NO! Your company was built with ideas to generate revenue and solve or evolve customer needs!
The Profitability Analytics Framework is all about looking at every aspect of your business – Revenue, Operations and Cost, and Investments and Capabilities. Every business problem has multiple dimensions and each needs to be explored for its viability. The PA Framework can help us be more creative and avoid the pitfalls of conventional thinking:
Cutting costs is a highly defensive move that will probably limit future options…unless it is combined with a strategy to grow customers and revenue.
Lost or forgone revenue is very similar to a cost, though we seldom think of it that way.
Idle/excess capacity can be an undiscovered opportunity or capability, though we think of it most often as waste.
Management accountants have a multi-dimensional skill set, so don’t allow yourself to be trapped. Think through business problems and opportunities from all profit perspectives – Revenue, Operations/Cost, Investments/Capabilities. Create options, create teams, find the expertise you lack and help them do the same. LEAD and inspire them to do the same. It may not be your job, but that’s what a Business Partner does!