Have you ever wondered which drivers explain profitability
of organizations? Profit Impact of Market Strategies (PIMS) Programme analyzed thousands of case studies to
conclude that there is a clear set of drivers, which greatly determine whether the way
you do business will generate you the profit or not. Non-regarding which sector
you operate of course.
PIMS Programme proved that there are 15 drivers, which
explain 75% of variation in profitability.
The most important, which explain 50% of this are:
1) "Market share" – you’ll find here why it’s so important to
increase it,
2) "Productivity" – which is about following the experience curve,
also known as The Boston Curve, as it was developed in 1960’s by Boston
Consulting Group,
3) "Relative quality", which is about how customers perceive what
you offer it compared to competitors,
4) "Investment intensity", which is about what you do with the profit you earn.
The “golden rule” toward including these drivers in your
growth strategies is “get max” for market share, productivity and relative
quality” with “get minimum” in investment intensity at the same time.
You can find more on other PIMS drivers in The PIMS Principles: Linking Strategy to Performance by R. Buzzel and B. Gale. They
include among others rate of innovation and the way you protect your unique
differentiators from competitors or simplicity of logistics of your offer to
customer.
