Having a granular, cross-functional view of your operations and profit drivers can also eliminate silos by giving departments a shared understanding of what is impacting overall profitability and effectiveness.
“Once you understand the true profitability of your products and customers with 80/20, you can align your sales, marketing, operations, and finance teams to the same strategic objectives, such as driving bottom line growth,” says Charlotte Zhen, Senior Manager, Value Creation & Analytics. “It's also about stitching together various sources of data, owned by various functions, in the same report so that everyone has a clear, common view on performance.”
The 80/20 advantage:
Sales teams are usually compensated or measured based on top-line revenue, but often, once you look at the bottom-line contribution, it tells a different story.
One company our team worked with had exemplary top-line sales, but what leadership didn’t realize—and what our 80/20 analysis showed—is that they were actually making many of their sales at a loss, resulting in stagnant bottom-line profits.
"Once you get a granular view on profitability, you can get insights into hidden discrepancies and cost factors that may have been previously overlooked,” Cove says.
“What often happens within a business is that the finance department sees a certain set of metrics, while operations sees something different, and the sales team has another set of objectives,” adds Zhen. “Decisions are often made in isolation, creating internal inefficiencies and making it more difficult to drive bottom-line growth. A data-driven single source of the truth allows all stakeholders to work towards a common goal."