Profitability
Does the company make money on every unit, or just in aggregate?
What it measures
Per-product margin tracking, pricing discipline, and product-mix management. Covered by questions about cost accuracy, pricing strategy, and mix review cadence.
Why it matters
Companies that only know aggregate profitability subsidise losing products with winning ones and don't realise it. Fixing the losers (or killing them) often doubles margin without adding revenue.
What good looks like
- Cost per unit is accurate, not a rough allocation
- Margin per product is visible
- Pricing is based on value, not cost-plus-habit
- Mix reviews happen on a cadence; losers get decisions made about them
How it evolves across levels
- L1 Foundation
Product costing exists; aggregate margin is known.
- L2 Structure
Margin is visible per product.
- L3 Performance
Pricing reviews happen; unprofitable SKUs are culled or fixed.
- L4 Excellence
Mix is actively managed; margin grows faster than revenue.
- L5 Mastery
Pricing power is real; customers pay for perceived value.