Is it Better to Think of Profit Gaps as Fields of Opportunities?

Every company has a potentially lucrative profit gap that sits between its present position and optimal bottom-line earnings. Here, as always, optimal means best possible with all things considered: mission, capabilities, limitations, and circumstances.

When Dr. Erno Rubik of the Budapest School of Applied Arts first introduced his cube-puzzle, it looked quite simple. But his calculations showed that its 6 colors and 54 positions have 43,252,003,274,489,856,000 (43 quintillion) possible patterns.

You can see why it is unlikely that one can solve a Rubik’s Cube without a system (an algorithm) to adjust and control the position of its individual elements while working toward its optimal solution of 6 uniformly colored sides.

Virtually all companies are more complex than Rubik’s Cube in their numbers and interactions of variables. With near-infinite possible patterns of procurement, production, and sales, the performance continuums are very wide.

Throughout my years of equipping and training companies to go for BestPossible profits, I have found that top-quartile performers embrace opportunities to improve most quickly and successfully.  However, those that start their journeys from 3rd or 4th quartile positions have greater needs and more ways improve. Whatever your industry, it likely has a bell-shaped normal distribution of competitors that range from near bankruptcy to approaching optimal earnings.

Whatever your present position, you can soon enjoy high-level success by deliberately and systematically going for optimal profits.

Given Rubik’s 43 billion-billion possible patterns, I can say without hesitation, companies of all kinds and sizes have an abundance of avenues for immediate profit gains, whatever their circumstances. This is more an issue of human limitations than of leadership competence.

Profit gaps are facts of life. Closing profit gaps is what business leadership/management is all about.

All businesses have 5 basic classes of resources:

1.  Capital – how well we attract and use our dollars affects the availability and latent value of all other resources

2.   Procurement Options – tapping into the right procurement options (including capital, personnel, materials and space) is key to profits, growth, and level of success

3.  Sales Opportunities – product/service mix is always a key controllable variable — optimal mixes of business allow us to get the most out of our production capabilities

4.  Production Capabilities – personnel, equipment, inventories, space, outsourcing options

5.  Information – visions born of fact-based knowledge propel us beyond our current perceptions, visions and self-imposed limitations

Profit is a controllable variable!  Every line item of your company’s income statement is controllable within limits of flexibility. Its profit gap is comprised of opportunities to more effectively acquire and use resources as well as exercise flexibilities to achieve optimal bottom-line results.

While human limitations relating to “Rubik complexities” in most cases make up a large part of a company’s profit gaps, there are other common contributors:

• Failure to identify and address profits constraints
• Adverse traditional policies/practices – “This is what we do and how we do it.”
• Resistance to change
• Restricted vision
• Complacency – Q2’s better-than-average achievement level is good enough
• Leadership/management shortfalls
• Many others

The above list may trigger explorations that lead to early advancements, but your company’s biggest eventual gains will come when it becomes technically equipped to go deliberately and systematically for optimal profits.

Businesses improve by tapping into their profit gaps – there is no other way: They have no other place to look. That’s why it’s best to think of profit gaps as fields of opportunities.

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Stay tuned for – The Science of Optimal Profit

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