Chapter 2
Conducting a Pricing and Profitability Diagnostic
Diagnosis is not the end, but the beginning of practice.
—Martin H. Fischer
Like many people, you have probably walked to your car one morning and found that it wouldn't start. After uttering a few choice words, you may have gone through a mental checklist: Has the battery died? Has the starter failed? Are there problems with my ignition switch or security system or something else? Finding no clear answers, you threw in the towel and had your car towed to a repair shop. Did the mechanic immediately start to replace random parts, or did he or she first do a diagnostic to determine the source of the problem? Likely the diagnostic was done. When the mechanic reported the findings to you, he or she would have described the problem, proposed a solution, and estimated the repair cost. Your mechanic may also have told you that a second worn part had been discovered that would be cheaper to fix now rather than later on when it had failed and potentially damaged your car.
This same process applies when an organization experiences problems with its pricing and profitability management. If the organization blindly begins to make changes without first carefully reviewing its processes, then it will likely produce an action plan as unfocused as it is ineffective. In this chapter, we will outline how an organization can carry out a well-designed diagnostic. These tactical recommendations will show how to assess internal capabilities, ...
