Strategic Brilliance: The Profit Revolution Beyond Growth
In the world of business, success is often measured by numbers — profit margins, revenue streams, market share etc. — and there is a common misconception that profit and growth are interchangeable terms.
Not only are they not the same, someone's been hard-selling the notion that growth trumps profit, because profit is a natural consequence of growth. It's not. We've gotten the equation quite backwards. As to the reasons why, that's the topic of another article.
For the moment, let's start with Economics 101. Profit is, simply, what is left in the bank after expenses is deducted from revenue. Growth on the other hand, can be measured by a wide spectrum of indicators such as increased market share, expanded product lines, or geographic expansion.
Prioritising growth can lead companies to make decisions that breed their own demise due to:
Prioritising profit on the other hand has the advantage of cultivating:
What to read next? Try What is a "Why" in Corporate Strategy?
To find out how I can help you and your organisation co-create a Me-Only corporate strategy, click on the button below to connect with me.
Not only are they not the same, someone's been hard-selling the notion that growth trumps profit, because profit is a natural consequence of growth. It's not. We've gotten the equation quite backwards. As to the reasons why, that's the topic of another article.
For the moment, let's start with Economics 101. Profit is, simply, what is left in the bank after expenses is deducted from revenue. Growth on the other hand, can be measured by a wide spectrum of indicators such as increased market share, expanded product lines, or geographic expansion.
Prioritising growth can lead companies to make decisions that breed their own demise due to:
- Increased risk: Chasing growth often means taking on more debt, investing in new markets, or expanding into new product lines, all of which can increase risk and instability.
- Loss of focus: A focus on growth can distract businesses from their core competencies and customer base, leading to a loss of focus and decreased competitiveness.
- Burnout: The relentless pursuit of growth can lead to burnout among employees, decreased morale, and increased turnover.
Prioritising profit on the other hand has the advantage of cultivating:
- Fitness, aka Resilience: Simply and factually, a profitable enterprise, adept at optimizing resources and maximizing efficiency, is better positioned to weather economic uncertainties and navigate evolving market landscapes. A truism that should replace the mantra of growth worship.
- Focus, aka Discipline: When profit is a priority, you think twice about hiring too many people, moving into a bigger office space, investing in a trendy technology etc. In other words, you don't spend what you don't have and/or can't afford.
- Freedom, aka Purpose: If you have to borrow to grow, then the master of the ship is the creditor, not you. Granted this may be more pertinent to companies that remain "founder" run, and much less relevant to professional managers.
What to read next? Try What is a "Why" in Corporate Strategy?
To find out how I can help you and your organisation co-create a Me-Only corporate strategy, click on the button below to connect with me.