20 of 24 people found the following review helpful:
2.0 out of 5 stars
Aimed at Large Businesses, October 27, 2010
As the Owner of a small business (50 employees), we are always looking for ways to improve our bottom line. I read a review of this book in INC. Magazine and thought it sounded like it had potential. However I was disappointed that many of the strategies suggested by the author are designed for large businesses with large product lines, and thousands of customers. For example, one of the strategies discussed in depth is to create more of a partnership with your customers, share information, create sales goals together which I agree is an excellent way to go. However, as a supplier of just a couple of products, to very large retailers, its a struggle just to get them to answer phone calls, let alone work on forecasting together.
There are some basic principals that can be applied to businesses of all types, hence the 2 stars, not 1. However they are few and far between. I am sure that this would be a great book for someone at a larger organization, but for me it wasn't a fit.
That being said, the information is presented clearly and in an easily understood manner, with helpful examples.
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7 of 8 people found the following review helpful:
5.0 out of 5 stars
Best Advice For Improving Profits, Cash Flow and Strategic Focus, November 10, 2010
This book gets 5-stars from me, because it breaks new intellectual, business ground AND provides an implementation framework that will get readers fast, big profit improvement results.
The fundamental premise of the book is that: nearly 40% of the average company's sales activity is unprofitable, and 20-30% is so profitable that it provides all the earnings after offsetting the losses. This premise is not new. As a consultant to independent distribution channel firms, I've been preaching on how to address this opportunity for 32 years with frankly little impact on audiences of distributors and manufacturing distribution-channel managers.([...])
While many managers know or suspect - more or less- that significant cross-subsidies exist between -customers, products, suppliers (especially for distributors and retailers) and even sales territories, very few have been able to both measure and capitalize on these subsidies. This book will help readers do both at an economic time when trying to sell and grow our way to greater profitability -as always in the past- just isn't going to work.
Byrnes has a good logical flow to the book, and it all is quite readable sprinkled with good case illustrations. His summarizes key points at the end of each chapter which the impatient reader might skim through first before diving more deeply into the content.
Byrnes has reasoned well that we must first (re)-"think" our assumptions about how to be successful and profitable (first 10 chapters). Then, we will need to "sell" our new assumptions and "micro-level" profit analysis to all of our stakeholders who naturally will be reluctant to give up fine-tuning what they habitually know how to do best. And finally we will have to "lead" change in "operations" to get results.
The biggest, first hurdle is the "think" part: to get our heads around the answers to questions like:
1. Why do such large, structural embedded losing customers exist within our business? How did this come to past so consistently across so many industries?
2. Why if our financial performance has been good for our industry and all key managers are hitting their budget numbers do such big profit improvement opportunities still exist for:
a. Securing and growing our best, most profitable core customers.
b. Transforming many big losing customers into winners.
c. And learning to say "no" to some existing and all new prospective customers who don't fit our re-focused, strategic scope and re-aligned functional capabilities.
3. How do we create an optimally complex cost-model ("profit mapping") for determining where we are making the big profits and losses that has enough credibility to take action?
4. Going forward how will all of our employees from top to bottom re-learn how to be part of the managing for both service value and net profits? Will, for example, our CFO welcome the opportunity to expand their job description and impact by also becoming the "chief profitability officer"?
5. How is it possible to grow profits and free cash-flow quickly with little upfront investment or expenses in these particularly tough economic times?
Byrnes answers these and more questions in the first section of the book entitled: "thinking for profit".
The second section on "selling for profit" improvement is comprised of 8 chapters. Highlights include:
1. How to turn "account management" from an art to a science.
2. How to turn annual sales forecasting into a profit-improvement and untapped core potential measurement and development tool.
3. And, why we have to sell service innovations that turn lose-lose, inter-business friction activities into win-win profit gains to key customers.
The third section (7 chapters) is on "operating for profit". After we sell our employees and our key customers (and suppliers) on win-win profit improvement possibilities, then we have to actually change our ways and (inter-business) processes. It turns out, of course, that our one-size fits all business service models and processes don't work for different sizes and types of customers and products. The solution to the one-way doesn't necessarily economically benefit the company is to re-think company processes to economically, precisely serve different sub-sets of customers hence a key theme of the book: "age of precision markets". We don't know, however, exactly where the economic boundary lines are for different service models to serve different customers unless we can calculate the horizontal process costs to serve which when subtracted from margin contribution determines net profit for a product or customer.
Although the cost-modeling and rethinking processes for different subsets of products and customers sounds difficult, Byrnes gives wise advice on how to keep everything simple and how to implement new ideas on an incremental basis: no jumping in any new rivers with both feet.
Even with terrific new, informational insights as to where your company historically has really been making and losing its money, the ultimate challenge will be to lead and execute on the changes that become informationally apparent. Byrnes addresses this in the last, "leadership" section of the book. The key points he makes are that leaders just have to expand their own boundaries of who they are and what they are responsible for. We can't just be traditional, departmental, silo cost and incremental change players, but horizontal-process, team, profit innovation players. The CFO must expand, for example, to be also the "chief profitability officer". Easy, simple, but wise and necessary advice.
This is a book that you may eventually buy multiple copies for a management team or a horizontal-process team. Don't ask or expect them to read it all on their own. Assign, instead, specific reading assignments and prepare specific homework questions that blend Byrnes' thinking with your company's related opportunities. The key to adopting new paradigms is lots of repetitive reading and case example application discussions followed by very small, pilot test experiments. Byrnes points out often that you can't justify experiments based on horizontal-process profitability insights with traditional experience math. When you are blazing a new trail for the company, there isn't an historic map lying around to use and refer to. You have to make your own as you go along.
In sum, in this tough economy, we can't sell our way to prosperity while harboring and growing embedded unprofitability. We have to make a lot more out of what we are already doing by transforming most losing elements into profitable ones and doing a better job of securing and penetrating what we do best. Then, we will have the cash-flow, confidence and corporate agility to entertain the possibilities of new adjacent growth opportunities. Buy the book!
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5 of 6 people found the following review helpful:
5.0 out of 5 stars
Excellent insight from one of MIT's best professors, October 14, 2010
First of all, let me disclose my bias; I had Jonathan Byrnes as a professor at Sloan. He was my favorite professor from all of my educators from both Harvard and Sloan (and that's saying a lot).
Jonathan Byrnes has always had a way of cutting through the noise to help direct you to the "heart of the matter." In addition, the style in which he performs this analysis is entertaining, informative and logical. You not only see the steps that he goes through, but you learn the process - so you can do it yourself "out of the classroom."
He brings nothing less than this (exceptional) didactic method to Islands of Profits in a Sea of Red Ink.
The fundamental premise of this book is an astonishing proposition: nearly forty percent of every company is unprofitable by any measure, and twenty to thirty percent is so profitable that it is providing all of the reported earnings and cross-subsidizing the losses. The rest of the company is only marginal.
It's a must read for any business leader who's faced with the question "How do I make more money?" as it gives you practical, tangible & useful steps for answering that question in your business.
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