Which Zone are you in?
Just like individuals, companies also go through a journey. A journey, littered sometimes with despair, sometimes with growth & sometimes with stability. Financial metrics gathered over the course of a lifetime of a company, can actually serve as a very good tool to tell the story of the journey.
We at QuarkCube believe that at any point in time, a company’s present state can be in any of the 4 zones below
1. Zone of Survival – A zone typical for companies that have just started up or companies that have just done a major acquisition. In this zone, Revenue and Profitability levers might not make much sense as the company is still trying to get a foothold in the market or is trying to make the acquisition work. Also this is reflective for companies that don’t have internal well defined processes across functions.
2. Zone of Growth – Typical for companies where both Revenue and Profitability are on the ramp up. Number of customers continue to be on the ramp up. Internal processes in the company continue to evolve to get them into Zone of Efficiency.
3. Zone of Efficiency – Typical for companies where they have had a consistent growth in Revenue & Profitability but Profitability slowly starts to taper or hit its peak. This is the most optimal Zone where the company is probably a market leader in what it does – its hard to grow Profitability beyond where they are today unless they innovate or diversify. Processes are probably at their peak of efficiency
4. Zone of M&A/Innovation – Typical for Companies who have seen consistent Efficiency in their Revenue & Profitability. But Profitability will continue to erode – this is the ideal zone for a company to look at ways to diversify their core business either through internal Innovation or M&A.
Its important that executives know which zone their company is in and rely on technologies to steer them to the zone of desire. A strong EPM foundation is necessary to move from one Zone to another.
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