In writing The Art of Profitability, Adrian Slywotzky is practicing what he preaches. He is seeking greater profits.
Slywotzky, a vice president of Mercer Management Consulting, has built a reputation as a prophet of profit, a guru of gain. He is the author or co-author of four previous books on the subject – most notably 1997’s The Profit Zone, written with Mercer vice chairman David J. Morrison.
One way to increase profits, according to both The Art of Profitability and The Profit Zone, is a strategy Slywotzky calls “the profit multiplier model.” This involves taking one “skill or story or other asset” and making money from it five, six or more times. Like Disney producing a film for both theater and CD and also licensing characters from it for a lunchbox design. Like Slywotzky reselling material from his previous books by repackaging it in fictional form – an imagined series of meetings between the business equivalent of a martial arts sensei and an eager student.
The student, “Steve Gardner,” is described as a strategic planner for an $18 billion conglomerate that owns 40 different businesses and isn’t doing very well in most of them. Gardner wants to know how to improve profits. That has brought him to the 47th floor of a Manhattan office building to meet the knowledgeable “David Zhao” who agrees to see him one-on-one for one hour every week.
Author Slywotzky lets the reader know how valuable he thinks such meetings would be by setting Zhao’s fee at $1,000 a lesson, although Zhao tells Gardner, “You can pay … when you are able to – if you ever are.” And Slywotzky reinforces the karate master-disciple characterization by having Zhao draw illustrative diagrams that look like Japanese ideograms.
A teacher-student dialogue is a fun idea and it’s certainly a novel twist on the traditional advice book format. In this small (5 by 7 1/2 inch) book’s 250 pages, author Slywotzky manages to have Zhao and Gardner touch on 23 different profit models. But it must be said that “touch on” is just about all they do.
Since this is a work of fiction, some of each chapter is devoted to atmosphere – to such profit-free paragraphs as this one: “A little tired, Zhao turned his chair toward the great window in his office, with the harbor of New York spread out far below. Overhead was a mottled patchwork – a deep, bright blue sky overlaid with a shifting pattern of lighter and darker grays formed by many cloud layers, moving rapidly under the blows of a steady northeast wind, while the gray-green waters below were broken into a million drifting fragments of darkness and light.”
And what prospective readers of The Art of Profitability should understand in advance is that in almost every lesson, David Zhao gives Steve Gardner a between-lesson reading assignment that is clearly also meant for them. Zhao assigns 20 books (including, you may not be surprised to learn, all four of Adrian Slywotzky’s previous efforts) plus five articles from past issues of either the Harvard Business Review or the Economist.
Some readers may welcome this guidance. If you never thought of the classic The Art of War by Sun Tzu or Ezra Pound’s ABC of Reading as business books, it might be eye-opening – not that Zhao (or Slywotzky) explains their usefulness in any depth. On the other hand, a reader who wasn’t counting on having to buy a small library in order to get The Art of Profitability’s message may well feel frustrated.
Also, it must be said that the fictional David Zhao, for all his erudition, can be downright annoying. In one chapter, after Gardner comes up with three ways to make a profit in a situation posed by Zhao, the “master” hands him calculations he has made that let the student know he’s on the wrong track. Gardner is crushed. He wonders how long it will be before he achieves understanding. “Months?” he asks. “Years?” Zhao encourages Gardner to keep at it, but he doesn’t bother to explain to the reader – in a clear, straightforward manner – why and where Gardner went wrong.
Adrian Slywotzky’s bottom-line message in this and previous books is that there is no one-size fits all road to profit. The Profit Zone made that point bluntly in an opening chapter entitled: “Market Share is Dead.”
Having the lion’s share of the market and selling more widgets this year than you did last year is no longer a guarantee of profits, it said, and then went on to describe other “customer-centered” strategies that various companies have used with considerable success. These are the strategies Zhao and Gardner discuss in The Art of Profitability.
Among them:
Multi-component profit: the art of selling the same product in different venues at different price levels. Coca-Cola sells its soda in groceries, vending machines and restaurants. Same product. The same customers may buy at all three, but they spend more at vending machines and restaurants. The grocery sales bring in very little profit but are essential to support the brand.
Pyramid profit: the art of selling variations of a product to different markets. Mattel sells Barbie dolls for $20 to $30. But it also sells a $10 Barbie, which is barely profitable, to prevent other companies from wooing away customers with a cheap Barbie-like doll. And it sells highly-profitable $200 “collectible” Barbies to grown-ups nostalgic about playing with one of the other Barbies as a child.
Specialty product profit: seeking out niche markets – finding a legitimate need or variation and addressing it which will bring in greater profit than dealing only in commodity markets.
Brand profit: Customers will pay more to get a name they have confidence in. David Zhao cites the example of cars manufactured by NUMMI, the joint Toyota-General Motors manufacturing plant in California. Customers were willing to pay more for the same car if it bore the Toyota brand. And,
Installed base profit: If you can get the consumer to buy your computer or software or initial product of some kind, you have a locked-in market for follow-on products, like upgrades and accessories.
Certainly, the wide variety of profit models makes interesting reading. But David Zhao’s teaching method – having Steve Gardner achieve understanding through self-discovery – both under-explains and over-complicates them at the same time. Most readers interested in Slywotzky’s take on profits would profit more by reading The Profit Zone.
