Profitability Improvement

As the saying goes: “If your profit margins aren’t rising, chances are your company isn’t thriving”. The truth is, everyone pays attention to profitability, but few companies have a process to systematically manage profits on a day-to-day basis.

Profit management is not a one-time event. It’s a continuous process, starting with accurate costing and profit reports on products, clients, segments, and entities.

When those data points are available, the best performing companies run their business through continuous identification, prioritization, and profitability improvement initiatives. These initiatives go beyond headcount reduction to look at ways to lift top-line growth and eliminate the weeds of bureaucracy.

We assist companies in assessing the current cost & profit models and implementing a stronger profitability management process through four specific domains of expertise:

Profitability reporting
To make progress, you need to know your baseline situation. Our reporting and analysis experts turn out the necessary reports to uncover your organization’s profitability structure, also revealing its actual drivers.

We create transparency in your cost structure, customer & product profitability and pricing architecture. We then assess the cost of products / services delivery and the productivity of your resources, identifying performance gaps with peers.

Cost model optimization
We help you gain a better understanding of your costs by challenging the model you have in place. Based on our track records within similar organizations and industries, we can pinpoint the main performance gaps and gather the necessary volumetric data and insights to optimize your model.

Customer profitability
To understand which customers are generating the profit for an organization and to avoid symptoms like margin leakage, we create a Cost-to-Serve model (individual activity based customer P&Ls) and use this model as a next step in a customer optimization workshop. Here we share insights on which customers deliver profit to your organization. For underperforming customers, corrective actions will be discussed.

Typical improvement levers are product pricing, change of existing services and / or change of product offering. Depending on the need, the Cost-to-Serve model can then be used to review product complexity and rationalize your product offering through amongst others threshold analyses and product duplicate elimination.

Process- redesign & mindset
In addition to applying our financial playbook of reviewing and reducing the level and pattern of spending and increasing profits, we look at the complexity of work to eliminate or redesign any activities that are not efficient or for which the cost exceeds the value. Next to the process itself, we analyze & improve dimensions such as governance, systems, data and the people involved (their motivation, mindset, skill set), to propose a holistic approach towards profitability improvement initiatives.

The massive amount of data that companies produce should be reflected in comprehensive dashboards that help management make operational decisions.

Contemporary technologies make it easier for us to aggregate, filter and interpret this data. Algorithms will detect trends and can serve as a basis for behavior prediction.

We support organizations in the entire process from gathering the relevant data to turning them into a set of predictive reports.

To make decisions under uncertainty, however, we need forward-looking information. That can be produced by weighing data and evidence in recurrent situations. The big leap forward will be from real-time to predictive & prescriptive analysis, which will allow organizations to focus on key areas of their business.

Companies will be able to make decisions using predictive tools based on high probability of outcomes and the identification of key risks. That leap can be RPA-assisted, in the sense that Robotic Process Automation can provide analytical capabilities to collect and examine data across disparate data systems.

We support the Finance department in the use of these methodologies to generate scenario-based planning. Different scenarios are generated by means of big data and algorithms and presented to executives at the right time.

Capturing and modeling all this data is far too complex and time-consuming to be performed without making use of prescriptive functionalities. Finance should embrace these functionalities to increase their added value with a holistic view on the near future, based on all relevant data that is available.