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The urgent need to prioritize customers and products

By under-standing true profitability, strengthening core business, and optimizing product portfolios, businesses can build real, sustainable value that can endure through economic shifts.
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Overview​

In recent years, consistent economic prosperity has driven companies to focus on top-line growth. Abundant access to liquidity has motivated companies to introduce new products and customer segments with limited consideration for cost-drivers or complexity. While these additions may appear attractive in a highly competitive economy, the seismic economic shift caused by COVID-19 has revealed the latent danger in these approaches.
Companies facing supply chain disruptions and plummeting demand are left with no choice but to turn their attention away from top-line growth and shift to cash flow focus. While some will inevitably fare better than others, all companies looking to adapt will need a thorough understanding of profitability, complexity, and the relationship between the two.
This paper breaks down Applied Value’s tried approach to understanding True Profitability, a component of the Commercial Excellence strategy. By understanding true profitability, strengthening core business, and optimizing product portfolios, businesses can stop chasing complexity-riddled strategies and build real, sustainable value that can endure through economic shifts.

Another part of our Commercial Excellence strategy is pricing, which is discussed in detail in the value paper Fact-Based Pricing – How to maintain a healthy pricing strategy where we outline how to develop and adopt smart pricing models.

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