"Are you adequately capturing a part of the value that you are creating for your customers? What is your profit model?" - Avinash Bhandari
Many small and midsized organizations, with their unique business models, create substantial value for their customers. The question however is, whether they are capturing a part of that value as profits for their organization.
General electric generates profits for itself from the “customer solutions” profit model. Swatch generates profits from its “product pyramid” profit model. Intel and Sony generate profits from their “time” or “first movers advantage” profit model. GE, Microsoft, Gillette and Maruti Suzuki generate profits from their “installed base” profit model while Nike and Coca cola generate profits from their “brand premium” profit model. Without a clear understanding of how profits happen and how businesses must be designed to capture it, there will not be any profits.
Designing the profit model keeping in mind the “value capture” dimension for the business is therefore a critical strategic skill.