Tuesday, October 8, 2002

HBS Working Knowledge: Finding Which Customers Don't Fit

Finding which customers don’t fit HBS Working Knowledge [News.com: News Around the Web]

A terrific article about the importance of (a) using front-line managers as leading indicators of what should be happening and (b) taking a hard look about what business you’re in, what business you should be in, and which customers you should have.

A snippet:

Try this today. Sit down for thirty minutes with the managers who run your company’s major departments (sales, operations, etc.), and ask each one to write down the names of five significant customers who shouldn’t be sold to, five products that shouldn’t be carried, and five services that shouldn’t be provided.

Surprisingly, in many companies, the managers’ lists would be so different that an outsider would think they were from different companies.

Why? Because most companies don’t manage profitability on a day-to-day basis—coordinating sales and operations to maximize profits to the fullest potential. Consequently, they have a few islands of high profitability, but lots of unprofitable accounts, products, and transactions.

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