1 Customer Solution Profit

To succeed in business, you have to have a genuine, honest-to-goodness interest in profitability. And most people don’t.”

“Invest time and energy in learning all there is to know about your customers. Then use that knowledge to create specific solutions for them. Lose money for a short time. Make money for a long time.”

“Suddenly, Barbie wasn’t a product any longer, but a system—a carefully crafted, coordinated, and integrated system. A firewall of defensive product at the bottom of the pyramid and powerful profit-generators at the top. Brilliant!”

A true pyramid is a system in which the lower-priced products are manufactured and sold with so much efficiency that it’s virtually impossible for a competitor to steal market share by underpricing you. That’s why I call the lowest tier of the pyramid the firewall.”

The customers themselves form a hierarchy, with different expectations and different attitudes toward price. There are Mattel customers who absolutely won’t spend more than ten dollars for a no-frills doll. There are others who’ll pay top dollar for a unique product. The pyramid captures them both. But not every marketplace can be stratified in the same way.”

3 Multi-Component Profit

“Different parts of a business can have wildly different profitability.”

“The customer behaves very differently on different purchase occasions.” “Meaning what?” Zhao pressed. “Different degrees of price sensitivity. Very different.”

4 Switchboard Profit

by organizing the talent, he had leverage with the studios. Ovitz could bring a great story to a hot actor and a hot director and then bring all three to a studio hungry for movie ideas. It was a brilliant idea—and like many brilliant ideas, obvious in retrospect.”

5 Time Profit

Ovitz created a Switchboard by connecting service suppliers—actors, writers, directors—with the movie production companies that needed their services. Seems to me it could work with products just as well as with services.”

“Meaning that Intel invents a new chip and makes money by being the first to market?” Zhao nodded. “Basically right,” he agreed. “The main difference was that Intel usually had two to three years to profit from their innovations, while Waterstone’s had only six to nine months.

“By the third time through this process, they had the system fully tuned. It busted the bank. In the past, they’d made $30 million in revenue and $15 million in profit on a typical new instrument. With the new ‘instant diffusion’ system, the numbers went to $100 million in revenue and $70 million in profit.”

What separates the winners and losers in innovation is who masters the drudgery.

6 Blockbuster Profit

R&D is antiprofit when it has no clear target, the wrong target—for example, a market where customers won’t pay for what you’ve developed—or a trivial target, where the total profit return is a fraction of the total investment.

How can we increase the feasibility level of the big projects? How can we accelerate their development? Can we parallel-process? Can we get more studies done to improve their positioning? What will it take to hit a home run?

insisting that Agri-Chem develop an imaginary portfolio of the top fifteen blockbuster opportunities in their markets, whether or not they had a corresponding product. It took six months, but he got them to create that list.”

7 Profit-Multiplier Model

“Profit-Multiplier is taking one skill and making money from it five or six times.”

“So you take a character, or a story, or a skill, or any other asset, and iterate it, reuse it, and give it a different form.”

8 Entrepreneurial Profit

Jack wants rock bottom prices, but also creativity and new ideas for better ways of doing things. So he’s intense with suppliers, but he doesn’t beat them up. He persuades with passion, making suppliers understand how they’ll benefit if Jack can keep on growing twice as fast as the rest of his industry. And Jack’s habit of planning in advance and being hyperorganized saves the suppliers a tremendous amount of headaches and money. So for most of them, he’s a very tough yet very profitable customer.”

It’s a simple mindset, one that says, ‘We can’t afford to operate any other way.’ That’s the source of a hell of a lot of profit. “The hardest thing in business is to keep the entrepreneurial spirit alive and flourishing in the wake of continued success.” Zhao paused. “Not unlike the drudgery of innovation, in a way.”

9 Specialist Profit

Hilbert’s strategy for learning was extraordinarily simple: sequential specialization. He would focus on one discipline for months until he approached mastery. Then he moved to the next. Then the next. It was a tight series of S-curves.”

“If you invent something—a solution to a problem—and you are well known as a specialist, you can sell that same solution over and over, five, ten, fifteen times or more.”

“Number one, lower cost through better knowledge. Number two, better price through reputation or through the unique design of their offering. Number three, shorter selling cycle. Number four, more rapid and universal penetration because of the wired effect. Number five, windfall profits because of the replication of high-value, high-margin answers throughout the marketplace.”

10 Installed Base Profit

In one bucket, you have the hardware or equipment, in the other you have the consumables.”

11 De Facto Standard Profit

The owners of the de facto standard can plan and can shape the next stage of the industry’s unfolding landscape, because it’s their business plan that drives it.”

“Your customers do your marketing for you and reduce your marketing expenses.”