Sustainable Profit Growth (SPG) has replaced Profit Maximization as desirable business objective during last couple of years. For perpetuation of business it is essential that business models constantly generate growth in profits while managing risks associated with business. SPG Goal also ensures Maximization of gains for all stakeholders of business – Shareholders, Employees, Customers, Government and Society as a whole. This goal also ensures synergy with Environment and global climate.
Sustainable Profit Growth Framework (SPGF) consists of three major components – Revenue Maximization , Cost Minimization and Risk Management . Further the success of any such framework requires Dynamic Planning, Effective Execution and Precise Review System. Such system should have ability to predict upcoming risks and opportunities in Macro Environment and take effective steps to adjust the business model. Key activities to develop SPG Framework are as below:
- Strategic Planning Framework : Business Planning at Macro and Micro levels have to be dynamic and adjusted to changing national and global business environment. This requires a Dynamic Macro Environment Analysis which involves framework to forecast changes in factors affecting business.
- Risk Management Framework : Risk Management is integral part of SPG Framework. Best of business models redundant , unless they have a high level of alertness for Risks associated with business.
- Consumer & Product Integration Framework : Aligning of Products to Consumer needs is key to SPG Framework. Business must integrate with consumer needs in a better and better way. To do this it needs to introduce new products as well as improving or exiting from existing products.
- Social & National Integration Framework : To sustain a business on a perpetual basis , it is essential that business views itself as vehicle to service vital social & national purpose. Companies which are integrated with Society and treats as important stakeholder are likely to achieve Sustain Profit Growth for longer future.
- Revenue Maximization Framework : Maximization of Revenue is key component to Sustainable Profit Growth Framework. This includes setting effective Sales & Marketing Strategies including Market Communication, Channel Development, Pricing, Segmentation, Customer orientation etc. Top Line Sales has also to be matched with effective Receivable Management System.
- Cost Minimization Framework : Cost Minimization is another component to SPG framework. An effective Cost Minimization Framework ensures that every rupee spent is productive. It involves combination of different tools such as Zero Based Budgeting, Innovation , Incentives etc.
- People Performance Optimization : Developing a Dynamic & Creative Manpower with right skill set and performing at optimum level is integral component of Sustainable Profit Growth Framework. This involves appropriate HR policies and Performance Optimization Framework involving Target Setting, Work Measurement, Creativity and Incentive System.
- Financial Value & Capital Adequacy Framework : Capital Adequacy and Financial Value Creation ensures that adequate funds are available for business growth and Financial Value is created for stakeholders on consistent basis.
- Operations Improvement Framework : Business serves its customers through Providing Products and Services. To serve its customer better , business should keep improving its orientation with customers. This requires framework for consistent improvement of its operations and tuned to needs of customers.
- Strategic Management Information System ( SMIS ) : A dynamic MIS ensures that Internal & External information is available for effective decision making. Dynamic MIS ensures Right Information at Right Time to Right Persons in Right Form.
- Strategic Auditing Framework : A dynamic Audit framework ensures that business works with in its policy framework and anything going wrong is highlighted at right time. This should also be used along with Strategic MIS and a Whistle Blower System.
- Systems Design & Automation : Business runs on Systems and for a dynamic organization it is important that Systems are regularly evaluated and improved. Further Automation of Systems is integral part of this activity.
- Knowledge & Creativity Framework : Sustainable Profit Growth requires that a business cultivates its Knowledge Edge. It also needs to develop a framework for Creativity & Innovation which is directed towards critical problems of industry and society
- Regulatory Environment Management : Effective handling of Transactions Processing and Regulatory Environment ensures that business hygiene is maintained and helps its focus on Profit Growth.
- Sustainable Profit Growth Framework is a constant process. It includes a combination of System Frameworks which ensure that Profit Growth is on a consistent basis while Risks are managed and corrective actions taken. These frameworks work at same time in synergy with each other. Success of a business depends upon its ability to design and implement above System Frameworks.