Why Focusing on Profit is Wrong

Capture3Focusing on profit is wrong because it’s not what your customers focus on. Therefore you and your customers have misaligned desires. This is sub-optimal.

Don’t get me wrong here…

I have not begun to express the revolutionary communist gene from my Govan ship-building grandfather. (I’ve got all the other expressions, apart from the skinniness. Jeez. Who decides this stuff?) 

Nyet.

I am deeply in love with profit and the more of it the better. It is a measure of my value and I like the validation.

I am saying that the most effective thing to focus on may not be your end goal. After all, you cannot directly control your results, only what you do.   

I am afraid that a lot of people…

…in bigger businesses don’t care about their customers. They think they do but they don’t really. This is palpable almost every time I deal with any organisation with more than 50 customers.

Some of you reading this will be thinking I am in cloud-cuckoo-land. Not in the real world. You imagine, with horror, telling your investors and stakeholders that you are going to dim your laser-like focus on profit and you are going to focus on delighting your customers instead.

In some organisations this will almost certainly hole your career below the waterline because your investors and stakeholders simply don’t trust you.

Yup – they don’t trust you…

…to manage your business. They are fearful that if they untie you from the rack of profit (or its coarse proxy: sales), you’ll go a bit mental on them. Flowers in your hair. Soft in the head.  

I’ve been there. I mean I’ve been one of the untrusted.

The problem with a focus on profit is that it can become a bit like this:

  • Products are built to a price
  • Services that are one-size-fits-all
  • The customer-facing workforce has a fear of failure (because they are being kicked around by the untrusting)
  • The operational workforce has a fear of failure (because they are being kicked around by the commercial people)
  • Suppliers have their value questioned and are treated as more of a replaceable commodity than they really are which will have its what-goes-around-comes-around moment
  • Customers feel as if they are being milked rather than understood and therefore see you as corporate rather than human and as such become focused on the commercial transaction and what they have to lose rather than the relationship and what they have to gain

It takes an act of faith to become truly customer-focused. One reason is that it doesn’t yield the immediately measurable/actionable profit or sales numbers that the untrusting manager requires (or her untrusting manager requires of her).

I have better relationships now with my customers in my wee business than I ever had in industry.

When I say better, better looks like this..:

  • I truly appreciate the money they give me because it is not guaranteed and it allows me to buy stuff for my boys (including the roof over their head)
  • I drive myself to over-deliver because it’s personal and I want to and the incremental cost of doing this is small (although the time can be large) and the alternative looks like crap
  • My over-delivery saves my customers a fortune in money and angst and that makes them value me all the more (OK – sometimes they don’t value me but that’s because they’re not in my core target market and that’s my fault)
  • My drive to over-deliver makes me get better at what I do and therefore more able to over-deliver and then we’re in a virtuous cycle
  • When I ask them politely for a significant price increase and tell them that if that makes their life difficult I’ll back off and do it for the old price they say “No no, the higher price is fine”
  • When I ask them what they want next they tell me with honesty and vulnerability (because I treat them like a human and therefore they act like a human) which allows me to give them a better follow-up offer and so the win-win thing propagates

You may think that in big companies you cannot do this.

I don’t agree – it has become more difficult in BigCo because of the Tyranny of the Untrusting but it is do-able. I can think of a car company, an airline, a bank (yes a freaking bank!) a high-end property management company and a financial investment company who are all huge but have not taken their eye off the ball. They are all doing very well indeed.

You need some faith.

Here’s the mantra…

Money chases value…

If you focus on delivering superior levels of real value the money will look after itself.

Focusing on profit is the same as thinking about winning the FA Cup while playing in the semi-final.

(n.b. FA Cup = important UK football competition with big, shiny cup for the winner.)

That’s a tactical and strategic calamity as the sports psychologists will tell you.

Money chases value…

It’s not about the money. It’s about the value.

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