For most businesses, getting their supply chain or production processes right is recognized as a strategic issue that sits firmly on the boardroom agenda. Yet until recently, parallel processes around price, profit and margin optimization have remained entrenched within individual departments, with little or no visibility at the C-suite level.
In the area of revenue lifecycle management, more and more businesses are starting to recognize the need to maximize price and profit performance as a central part of their growth strategy. Yet in implementing such initiatives, there is an increasingly clear divide between those putting effective programs in place and those failing to achieve the potential benefits.
A number of key factors have emerged underpinning the successful optimization of price, margins and profit. The most common element linking companies that are enhancing price and profit performance effectively is a recognition that optimization demands executive-level sponsorship from the start, combined with an enterprise-wide strategy for change. It is here that the role of the chief financial officer comes to the forefront as the key function within the business where the diverse aspects of an effective change initiative come together.
Companies that see price and profit initiatives as the sole responsibility of sales and marketing, sales operations, or finance will only achieve only siloed benefits. It is critically important to have C-level ownership of profitability, with the best results achieved when the revenue lifecycle is recognized as a joint endeavor with each department collaborating to meet common financial goals under the control of the CFO.
Operational issues such as optimizing supply chain and production processes, for example, are recognized as strategic goals that for some time have been firmly established on the boardroom agenda. By contrast, pricing and profit processes have until recently been among the least automated across manufacturing and service industries, with little or no visibility at the C-level.
Spreadsheets, word processing documents and even pen and paper have remained dominant, with rudimentary management, oversight and execution of pricing plans and policies. As a result, it has not been unknown for sales staff in large multinational businesses to offer discounts that erode margins severely. This has not only pushed individual customer profitability unwittingly below target, but in...