Don't apologize for profit
A lot of people continue to be embarrassed and apologetic when mentioning that their company's profits have increased. "Profit" is wrongly still thought to be a dirty word, especially amongst British and other European people.
Profit is a good thing and there is no reason why everyone involved in carrying out a particular transaction cannot benefit. For example, a group of partners could deliver a mobile business solution to a customer for mutual benefit.
The solution could be, for example, allowing a water company to remotely monitor its water pipes around the country such that if water stops flowing as freely through the pipes, a mobile phone connected to a water flow meter can send a text-based message as a warning to the water network center or direct to a service engineer who can investigate the possible leak. This means you get to know information without actually having to be physically present to find out whats going on with the pipes.
Everyone benefits:
 | The mobile phone network benefits from use of its network to send the warning messages |
| The network service provider sells the phones and gets a share of the revenue from messages sent |
| the systems integrator earns a fee for integrating the water flow meters with the mobile phones and building the leak warnings into the host water network center systems |
| the customer can meet its business requirements more quickly and cheaply, avoiding costly leaks. This customer can in turn serve its customers more reliably and so on and so forth. |
Profit is measured as income minus costs. If party 1 in a transaction incurs a cost from using party 2, both parties can still earn a profit if the income they earn from providing the service exceeds the cost of obtaining that service. Hence, in almost all of the situations when we are talking about our profit levels we should never feel embarrassed about how high they are (how minuscule they are is of course another matter).
All parties provide complimentary roles to each other, each of which is critical to the development and delivery of the solution. In return for making these skills available, each party earns a positive return.
Obviously, the extent to which different parties profit is open to negotiation. The greater the sales of phones and use of airtime, the greater the discount that the purchasing people at the end customer are likely to able to negotiate. The less value each party adds to the solution, the lower the return they should earn.
Eventually, if some other party can more cost-effectively perform another party's role themselves, then that incumbent party may be cut out. For example, the network provider could sell direct and cut out the middle person, the service provider and their margins. But this would require the network provider to bill the customer, hold equipment, provide account management and customer support etc. and would damage the ongoing relationship with the service provider and jeopardize retention of existing customers.
Parties which do lose out are any competing consortia whose aim is also to provide that solution. Clearly, end customers are committing to a certain mobile telephone network, to the detriment of its competitors who do not win that business. This is where competitiveness comes in- between companies. However, competitiveness is certainly not an issue between countries because if the US grows by 1% the UK economy does not shrink by 1%, indeed to the extent to which the UK and US are inter-related the UK would benefit from the US growth.
When business activities are complimentary, all parties involved can earn a profit. When inter-company business activities are competitive, some earn a profit and some do not. Just because one company gains and one loses, does not mean that profit is a bad thing. The only time that profit is not a good thing is when it has been dishonestly or illegally won- for example, as the expense of the environment (rather than another company) or through force and coercion.
Profit is a good thing. I like the way Japanese people view it as a reward for good service rendered. That is exactly what it is. Let's stop apologizing for profit and instead celebrate it as a measure of the value our partners and customers place on our existence.
Author:
Simon Buckingham
What do you think?
- To make a comment to the author, send e-mail to simon@unorgan.com
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