Almost every business has the same goal – to increase profitability, however many organizations find this to be the most challenging aspect of business simply because there isn’t one answer. They tend to either over-complicate or over-simplify their approach when in reality there are only 3 methods to increase profitability of your products or services.
1) Increase the price
2) Reduce the cost of development and delivery
3) Sell more
Let’s look at this from an organizational level where it is most commonly addressed. If a company wants to be more profitable they need to either raise their prices, eliminate waste (which is where Lean Six Sigma comes in) or get more customers. It may seem like this formula can only be executed at the organizational level, however I’d like to challenge you to apply the same formula at the project level.
For example, a common Lean Six Sigma Black Belt project is to increase profitability of a product or service and although a lot of resources and effort may go into the project, this is where many companies continue to struggle because they don’t know why they are working on what they are working on. Ask yourself which of these methods is your Lean Six Sigma project trying to accomplish? Remember even if your project is working to improve a specific area within your customer service, ultimately the likely goal of the Lean Six Sigma project is to enable you to sell more, or retain more customers, or keep the costs down, and each of these can be tied back to one of the 3 methods to increase profitability.
Take a look at your current or upcoming Lean Six Sigma project and see which one of these methods it is focused on. If you are trying to focus on all 3, your scope is pretty large and you may find more success by reducing the project to focus on only one of the methods. Remember, increasing profitability is actually a formula and each function of the formula must be solved independently, not all at once.