When we're brainstorming ways to improve profits, is it better to include new products/services under ‘revenues’ (for eg, within revenues there can be current revenues, new revenues buckets) or is it better to capture it under a “new profits" category..since technically any new product or service would also have associated costs and not just be an increase in revenues?
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Hi there,
I hope you don't have a “revenues” and a “profits” bucket in your framework! This would not be MECE.
Honestly, I would rather put new products/services as it's own bucket. (complemented by an “existing revenues/products” and a “buy” bucket)
Hi!
Good point!
I think it much depends on how you draft and communicate your structure.
For example, you might have two buckets: 1) profits from current products/services and 2) profits from new products/services. For each sub-bucket (i.e. the specific product/service) you can then drill down into its revenue and cost side.
Does this make sense?
Best,
Anto
Hi there,
As this is a case on profits with potentially new products, there are 2 potential ways to structure the first level of the issue tree:
- Split by profits of new and existing products (and the next level would involve splitting each product segment by revenues and costs)
- Split by revenues and costs (and the next level would involve splitting revenues by each product segment; the split of costs is slightly more complex as there are multiple ways to go about it)
Which method you deploy really depends on the business/ situation. For example, if the new products are very different from the existing products, then the first method may be more appropriate. Extreme example: if your current product is food, and you are looking to expand into cars, the first method could be used here.
If the products are very similar, especially in terms of profitability and/ or cost structures, the second method may be more suitable.
Hope this helps! Please let me know if you need further support
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