Profitability, Revenue Growth and Process Standardization

It is often necessary to give up short term profits to maximize revenue growth. Introductory discounts, special offers and other incentives are very common methods for getting new customers.

Most organizations use another strategy to grow revenues, they empower customer facing business units to serve the customer in special ways. This is often very effective, but the result is often a proliferation of products, services and behaviors. This is not usually the most efficient way to use corporate assets and therefore represents a choice to increase revenues at the expense of immediate profits.

For IT managers, product and service proliferation creates problems. In many cases the result is either no support at all for many business processes or an attempt to impose a poorly suited 'enterprise' solution on all business processes.

To achieve efficiency, but avoid constraining revenue growth, managers need to recognize the nature of the tradeoffs involved. Often, the situation may be temporary, which also affects decision making.

Business managers and executive teams are really the ones who need to own the decision making about how to support business units with automated systems. Decision making needs to reflect the fact that there are costs in supporting diversity in product and service offerings, but also the fact that while process standardization may reduce costs and therefore increase profits, it will often result in reduced revenue growth.