Peter Burke is back in an insightful  and lively discussion about the components of profit. What is profit? Can you really chase profits or is profits a by-product of decisions and actions?

This interview goes beyond the bottom-line to come up with three things about profit that every business owner should know. Topics include the importance of being focused, creativity, community, and employees. Special attention is on objectives of profitability from David Packard’s book ‘The HP Way’ and whether they are relevant today or not.

 

Show Notes

Three Components of Profit

  • Profit is a lagging measure of the business contribution to customers, employees, and community.
  • Profits require serving by enhancing the customer’s gain and reducing the pain.
  • Profits require leadership and organization in the process “make it, sell it, keep track of the money”.

 

How we got to this in an unscripted podcast episode:

Curiosity and Fun

  • Primal needs for humans so take the time to be curious.
  • Many companies allow 5-10% of employees time to be creative.

The HP Way

  • HP is Hewlett Packard, founded by Bill Hewlett and David Packard
  • From the book “The HP Way” by David Packard
  • HP Seven Objectives in 1966 (from page 80 of the book)
    •  Profit – To recognize that profit is the best single measure of our contribution to society and the ultimate source of our corporate strength. We should attempt to achieve the maximum possible profit consistent with our other objectives.
    • Customers
    • Field of Interest
    • Growth
    • Employees
    • Organization
    • Citizenship

Old concept for Profit?

  • No, but wording often needs to be re-packaged.
  • We are all standing on giants shoulders.
  • Has the word ‘profit’ gotten too ambiguous?

Profit is a Measure of Past Performance

  • Profit is a lagging indicator. If so, you don’t chase profits because you can’t, you can only measure them.
  • Chase the things that influence profit.
  • Reducing the customer pain.

What is “Contribution” that Leads to Profits?

  • What is the business contribution to customers, employees, and community?
  • The community is a place to contribute skills, talents, and money.
  • Be in a community or start your own. Face-to-face or Virtual.
  • No contribution if can’t make it, sell it, or keep track of the money.
  • Producing value for others.

A Secret to Profit

  • It is getting information from people outside of your immediate sphere or getting information from potential customers. Find those customers while you’re developing the product.

 

Links to Resources

Peter referred to a lot of names. 🙂

Howard Vollum  –  Co-Founder of Tektronix

Herbert Hoover –  31st president and engineer

Ernesto Sirolli – Founder of the Sirolli Institute for Enterprise Faciliations

Dr. W. Edwards Demming – management guru that many companies still use today.

Holly Barker – Founder of Grief Anonymous

Keith Bartlet –

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