“The Art of Profitability” by Adrian Slywotzky is a fascinating book which reveals twenty three different business models which an entrepreneur can use to build a profitable business.
What Is A Business Model?
A business model is the way your business creates value for customers and captures its fair share as profit.
The best business models build their own momentum so success automatically leads to more success.
Who Is Adrian Slywotzky?
Apart from having a very difficult name to spell, Adrian Slywotzky at the time of writing The Art of Profitability was the thought leader at management consultants Mercer Management Consulting. A quick search on the Internet indicates that Mercer has merged as the old website takes you to Oliver Wyman, a name I am not familiar with.
Adrian Slywotzky has written a number of books and the Mercer magazine used to be excellent.
Articles from Mercer were one of the inspirations for my interest in customer value although their focus is very much on the big blue chip companies rather than the small business sector.
Review Of The Art Of Profitability by Adrian Slywotzsky
This book is small but powerful
Format Of “The Art Of Profitability”
This is a management book set in a story book form (like The Goal by Eli Goldratt) with Steve, a young executive having regular lessons from profit master David Zhao.
This makes The Art of Profitability easy to read. I don’t agree with the guidance to readers to only read one chapter per week.
I favour reading the book through fairly quickly, then revisiting each business model in more detail and working with the ideas. Finally picking your preferred models and seeing how they could be applied to your business.
In my walk-through of “The Art of Profitability”, I am going to look at the first four business models in some detail and then just list the titles of the next six because I want to give you a good flavour of the type of ideas you will find.
Business Model 1 – Customer Solution Profit
High acquisition and initial service costs can mean that a business loses money in the early months of gaining a new customer but profit builds consistently through the relationship.
This is basically my coaching model and especially the case when I work on a profit share basis. I invest heavily at the start of the relationship as I learn about the client and absorb that cost (when a time based consultant would charge high fees without delivering much value at that stage) but earn my profits as the success of the relationship shows through in bigger client profits.
So for this model the key question is – are you willing to invest in your customers at the start to reap the rewards later?
Business Model 2 – Pyramid Profit
Through a series of multiple offers your customers stack into a profit pyramid with a large number of customers at the bottom with small profits leading up to a few customers who contribute large amounts of profit.
This is done by selling a basic product at a very competitive price and then offering additional products and services to people willing and able to spend more.
The example given in the book is the Barbie doll where some children will just have the basic entry level product, others will buy multiple clothes and accessories and there are even premium Barbie dolls as collectors pieces for adults with an emotional connection to the brand.
Business Model 3 – Multi Component Profit
In this model, a business will sell the same product in different formats to different customers (or through different distribution channels) at different prices.
The example given in the book is Coke (supermarket multi-packs, restaurants, vending machines) but an example from my own past is a milk dairy. This business had its own milk rounds, sold milk to independent milk men and also sold to the big supermarkets.
The essence of a multi component profit business is to find different ways to package up their product to different customers to sell at different prices.
Business Model 4 – Switchboard Profits
In this business model you bring products together in unique combinations to create a profitable project. The more components you can combine, the more opportunity you have for creating something particularly special and profitable.
The example in the book is the Hollywood agent who represents stars, writers and directors and by putting together a dream package, the agent has much more bargaining power.
Business Models 5 to 10
Are you getting a flavour for the different ways a business can be designed to create profit?
Some businesses naturally fall into an imitation of one design so the issue becomes “Are you making the most of your business model?”
Here are the titles of the next six to whet your appetite:
5 – Time Profit
6 – Blockbuster profit
7 – Profit Multiplier Model
8 – Entrepreneurial Profit
9 – Specialist Profit
10 – Installed Base Profit
Who Should Read The Art of Profitability by Adrian Slywotzky?
If you are an entrepreneur, a want-to-be entrepreneur, business designer or business coach /consultant concerned with helping your clients to make more money, then I recommend you read The Art of Profitability.
In some ways the book is an easy read but it will reward thoughtful reflection and this is the only book I’ve read that looks at different business models.
If you know of another, then please leave a comment.
My Reservations About The Art Of Profitability
I do have a few minor reservations:
- The book doesn’t move into an action phase. It gives you ideas about “what business model” to aim for but doesn’t tell you how to build it. A few practical tips would have been nice but just knowing where you are going is a big plus.
- Some people will just read the book, follow the story line and miss the main lessons. Just as I was commenting on Raving Fans, I would have liked to see one page summaries about each model to reinforce the important factors.
- Many models won’t apply to one particular business so there is a danger that a reader will be locked into a “won’t work for my business” mindset and then misses a cracking idea that could transform their fortunes.
Conclusions About The Art Of Profitability By Adrian Slywotzky
I highly recommend “The Art of Profitability” by Adrian Slywotzky to you.
This is a book which influences my thinking about business opportunities.
Your business model is very much the big picture of your business. The grandest of grand strategies if you like.
Select the right business model for the right opportunity and implement it effectively and you will prosper. Work with an under-developed business model and you are making your working life much harder than it needs to be.
You may also be interested in
It looks at how you can move your business model forward from selection, through design to more detailed planning.
You may be interested in other books by Adrian Slywotzky:
Have You Read The Art Of Profitability?
If you have read this book by Adrian Slywotzky, I’d be very interested to hear if you rate it as highly as I do so please leave a comment.
Paul Simister is a business strategy coach who helps business owners to differentiate their businesses and develop winning strategies. Get your free copy of the ebook The Six Steps Profit Formula.
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