Islands of Profit in a Sea of Red Ink.

Position:Book review
 
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By Jonathan Byrnes

Portfolio, 304 pages. $27.95

Many CFOs will surely nod their heads when author Byrnes writes that even leading companies have to wrestle with unprofitable businesses alongside their profitable cores. Perhaps it's just a truism in corporate ecosystems. If every business line ruled its market, a corporation would be almost unimaginably profitable.

That won't happen, but Byrnes believes that he can help bring up the laggards. He offers a systematic way to analyze profitability to determine which parts of a business are worth expanding and which represent an Unprofitable swamp. He details a set of "profit levers" to transform unprofitable business into good businesses, and good ones into great ones.

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A key precept here is what Byrnes, a business consultant for many years and senior lecturer at MIT, calls "the Age of Precision Markets." It's a reflection of the building consensus that ever-increasing specialization and customization are the keys to winning the war for the consumer--and the antithesis of what has long been taught in business school.

That doctrine, developed for mass markets, held that companies needed to fine-tune their mass production and distribution to maximize profits, but revenue dollars were essentially all the same.

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Instead, Byrnes writes, increasing profitability arises from a coherent strategy built around three pillars: customer value is paramount; strategy is defined by what you say "no" to, and you have to be best at something. Customer needs are a moving target, he argues, and can never be taken for granted.

Appropriately in this stagnant economy, Byrnes eschews cosily new initiatives...

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