Profit Pools: A Fresh Look at Strategy Orit Gadiesh, James L. Gilbert Harvard Business Review, May-June, 1998

Profit Pools: A Fresh Look at Strategy Orit Gadiesh, James L. Gilbert Harvard Business Review, May-June, 1998  Where and how is the money being made in an industry?

An industry Value Chain  An industry Value Chain is the collection of all business activities necessary for the end user to benefit from the product. – This includes both supply and distribution chain activities, as well as complementary products and activities.

Profit Pools  Profit concentration among activities of an industry value chain is often different from revenue concentration. – Automobile financing is the most profitable element of the automobile value chain. – Concessions sales are an attractive profit pool to entertainment venues.

“Choke Points”  Positions which can influence participation in an industry, and the distribution of its profits – Control of a choke point can be very profitable

Implications of Profit Pools  Be sure to participate in the best profit pools of your industry  Look for and capture “choke points” when possible.