Profit Patterns

Adrian Slywotzky and colleagues at Mercer Management Consulting wrote this as a catalogue of recurring patterns by which profit moves between firms and between parts of a value chain. It extends the value migration argument of Slywotzky's earlier work.

The book identifies roughly thirty patterns grouped into categories: megapatterns such as the shift from vertical integration to de-integration, value chain patterns such as the movement of profit to the point where the customer's decision is made, customer patterns such as the fragmentation of a mass market into microsegments, channel patterns such as channel compression and multiplication, product patterns such as the transition from product to brand to solution, knowledge patterns, organisational patterns and capital patterns. Each is illustrated with company cases from the 1980s and 1990s.

The method is pattern recognition rather than analysis: Slywotzky's claim is that these configurations recur across industries and that a manager who knows them can identify where profit will move next in their own. The weakness is that the patterns are identified retrospectively and no test is offered of whether they predict. Many of the cases have aged badly, and the book's confidence about which companies had positioned themselves correctly reads awkwardly now. The underlying observation, that industry profitability moves between stages of a value chain and that market share and profitability decouple, is sound and remains useful.