Having spent the last few months working with a team to develop an accelerator that customers can use to expedite the analysis and reporting of data generated in
SAP BusinessObjects Profitability and Cost Management, I’ve come to realize that the hours I waste bird-watching are actually well-spent. I’m not a ‘twitcher’ travelling all over the country at the drop of a hat on the off chance of bagging some rarity that I haven’t seen before. I just leave the house and wander down the marsh with a pair of binoculars and a spotting scope, happy to see what’s around. Part of the enjoyment is the process of identifying exactly what it is you’re looking at. The shape, size, markings and movements of a bird all help towards a positive identification - along with other other information about whether the specie is likely to be found in such habitat at this time of year. But unless you get a clear view of the particular features that leads to a positive identification, you typically end up undecided between a couple of possible species and quite often you just have to tag it as a ‘LBJ’ – little brown job – and move on. Seasonal and age-related changes in plumage don’t make it any easier and some genera such as warblers can be very confusing – for me at least.
Business managers are presented with many of the same challenges when it comes to actively managing customers in order to optimize profitability. If they used an accurate and reliable costing methodology then they can be pretty sure whether an individual customer is profitable or not, but that’s only half the battle. Often the biggest challenge is to identify the underlying factors that make a particular customer unprofitable in order to take actions that moves them into profit. It could be that they are enjoying more favourable discounts than other customers or they are only buying low margin products, but even this might escape your notice unless you had adopted best practice and analysed profitability across multiple dimensions. A more likely scenario is that the way certain customers are doing business with you is resulting in an abnormally high cost to serve; things such as placing a high number of small value orders, generating a high level of returns or needing special processing that results in additional costs. But until you have identified exactly what it is that makes certain customers unprofitable, you cannot possibly take corrective action.
The Customer Value Accelerator that our team has developed does all the hard work for you and contains pre-formatted profitability reports and analysis of the factors that are the typical discriminators between profitable and unprofitable customers and products in a specific industry. Needless to say, it’s not exhaustive, but others can be easily added in. The net result is that you get rapid insight into where the issues really lay and what actions need to be taken to improve the bottom line. That way there’s no indecision, - just crystal clear focus that tells you everything you need to know. Surely birdwatching would lose most of its appeal if it was that easy!
