October 25, 2010

Jonathan Byrnes, senior lecturer at MIT and author of new book Islands of Profit in a Sea of Red Ink, spoke with Lindsay Konzak, editor, about why 40% of every business is unprofitable and how to fix it.

MDM: You write in your book about the Age of Precision Markets. What is the importance of this for managers?

Jonathan Byrnes:We were for decades and decades in what’s commonly called the Age of Mass Markets – from the early 1900s to about 20 years ago. The objective in most companies at a time when national markets were forming was to get economies of scale and drive costs down in mass production. The idea was to sell as widely as possible using mass distribution – the more volume you got the lower your cost and the higher your profit. The volume of revenues equaled profitability. Most customer relationships were arms-length. You dropped orders off at customers’ loading dock, and in that era distributors were simply part of the manufacturer’s outreach.