Profit Mapping

Profit Mapping is a systematic and holistic method for business improvement and managing execution. Profit Mapping helps companies achieve their cost and operational objectives by linking organizational decisions and activities directly to the business objectives. This ensures that every action, from the corporate suite to the production floor or services environment, will bring the organization closer to business success as defined by its strategy.

Profit Mapping is actually a verb that describes the application of the ProFIT-MAP Methodology to address a particular business challenge. ProFIT-MAP is a parametric activities-oriented approach grounded in systems theory for understanding the process characteristics, resource requirements, and financial performance implications for any operational change.

Focus on Business Execution

Profit Mapping is used by companies to execute their strategy no matter what it is. Strategy can range from everything to improving profitability, increasing customer satisfaction, reducing costs, becoming more flexible in product or service delivery, reducing waste, and so on.

As companies translate strategy into measurable objectives, Profit Mapping then bridges the gap between planning and execution. It does this by identifying:

• The nature of the problem within the context of the capabilities and constraints of the organization.
• The specific parameters under management control that are linked to the business challenges.
• The sensitivity of the various parameters for improving business performance.
• An execution roadmap showing the specific steps and actions required to achieve the business objectives.

Complementary Nature

Profit Mapping complements the many strategic frameworks, improvement approaches, and measurement options in business today. It does not replace what companies already find helpful. Rather, its integrated and dynamic nature enhances existing business improvement efforts by providing additional critical “perspective” and guidance that might not otherwise be available to decision makers.

For example, there is an implicit assumption that becoming lean or reducing product defects through Six Sigma leads to cost savings. Many companies have learned through experience that while these are sound improvement strategies, they do not always have the intended impact on overall business performance relative to the financial and time investment devoted to the efforts.

Such results should not be surprising as lean and Six Sigma are designed to improve process efficiency, but do not explicitly focus on the overall effectiveness of the organization. Profit Mapping can help these types of process-focused initiatives by showing precisely which lean or Six Sigma activities will lead to both process as well as financial improvement. This helps managers understand the cost and profitability implications of their change options so they can make more effective decisions.

Applies to:

Business Type:

Manufacturing and business services

Business Context (enhances):

Activity-based costing
Balanced scorecard
Benchmarking
Business planning
Business process improvement
Capital investment planning
Continuous improvement
Corporate or divisional strategy
Design for manufacturability
Economic value added
Financial modeling
Flexible manufacturing
Human resources management
Lean manufacturing
Lean operations
Management accounting
Mergers and acquisitions
Process design / redesign
Performance management
Product design
Product planning
Research and development
Risk analysis
Six Sigma
Sourcing decisions (e.g., insourcing, outsourcing, offshoring)
Strategic management
Supply chain management
Theory of constraints
Toyota Production System
Value Stream Mapping

Book ISBN

ISBN 0-07-147228-2