Most leadership teams are making multi-million dollar decisions with only half the picture. The organisations that see clearly are pulling away from the pack.
Most executive teams believe they understand their profitability. They can point to margin trends, rank their biggest customers, and confidently describe which products “make money.” Dashboards look sophisticated, numbers reconcile, conversations sound informed.
Yet when decisions start to disappoint, when growth adds complexity but not profit, and when volume increases but margins stall, the same question emerges: “How can this be happening if we understand our profitability?”
The answer is uncomfortable but common. What feels like insight is often only a high-level approximation that omits important details which change the profitability equation. Most organisations manage profitability at an aggregate level based on broad categories such as product groups, brands, regions, and customer groups. Those views are necessary, but they are not sufficient. They mask the dynamic economics that exist at the intersection of product, customer behaviour, service model, and operational complexity. And it is precisely in that intersection where value is either created or unwillingly destroyed.
Granular visibility means breaking down profitability to the most detailed level possible; typically individual products, customers, channels, and locations. When organisations move beyond averages, the picture that emerges is rarely what leadership expected. Products that appeared profitable in aggregate turn out to be loss-making once all costs are properly allocated. Customers that seemed attractive become unprofitable when the true cost-to-serve is understood. Growth initiatives that boosted volume quietly introduced packaging, handling, or service complexity that drove up costs across the supply chain. And in almost every case, a handful of products are dragging down the performance of entire categories or regions, absorbing disproportionate operational effort while delivering little in return.
This level of visibility fundamentally changes how organisations operate. Assumptions are replaced with facts, emotion gives way to objectivity, and internal debate shifts from defending positions to confronting reality. Instead of arguing about which numbers are right, leaders can finally ask better questions about what to do next.
A global food and beverage manufacturer, the clear category leader in its market, found itself facing declining margins despite strong brand equity and scale. Over several years, the company had expanded its product range to chase incremental growth, resulting in a sprawling portfolio and rising operational complexity. A detailed SKU-level analysis revealed that many variants were adding disproportionate manufacturing and logistics complexity, service levels were deteriorating due to fragmented production runs, and the long tail of the portfolio was consuming significant operational effort without delivering commensurate value. Critically, the margin erosion was not being driven by any single strategic misstep; it was the accumulated weight of micro-complexity that no individual decision-maker had ever been asked to account for.
Armed with this insight, the company undertook a structured simplification programme, rationalising low-value SKUs, streamlining formats to reduce manufacturing changeovers, and reallocating resources toward higher-margin, higher-velocity products. The result was a more focused portfolio, improved profitability, and a supply chain that could support growth rather than constrain it.
This example illustrates a pattern playing out across the consumer products sector. Complexity accumulates quietly, and only granular profitability and cost-to-serve analysis reveals where value is truly created and where it is destroyed.
These actions are not isolated. Across consumer products, leaders are confronting the same structural reality. SKU counts have grown steadily over the past decade, but real profitability has not kept pace. Slow-moving variants, fragmented pack sizes, promotion-heavy lines, and exception-based service models may appear acceptable when viewed at a category or brand level. But once logistics, inventory, service, and overhead costs are properly allocated, many of these choices are revealed to be value-destructive.
The response, for organisations willing to act on what the data shows, has been to reduce the long tail, standardise formats, redirect investment toward fewer and more profitable products, and tighten the new product development process so that complexity costs are understood before a decision is made rather than discovered afterwards. Not because choice doesn’t matter, but because choice drives complexity, and complexity costs.
Shifting focus from gross savings to net productivity, thereby enabling us to determine more accurately the true level –and impact – of costs on profitability.— Hein Schumacher, Chief Executive Officer, Unilever — AnnualReport and Accounts 2023
The challenge of cost visibility is not limited to small or mid-sized businesses. In Unilever’s 2023 Annual Report, CEO Hein Schumacher described a fundamental shift in how the company measures performance; moving away from gross savings toward net productivity, with the explicit goal of determining more accurately the true level and impact of costs on profitability. If granular cost visibility is a strategic priority for one of the world’s largest consumer goods companies, it is a competitive necessity for everyone else.
Most profitability problems are not caused by one bad decision. They are caused by hundreds of small decisions made with incomplete visibility:
Individually, each decision makes sense. Collectively, they reshape the economics of the business, often without anyone noticing until margins are under pressure. Granular profitability doesn’t just reveal where money is made or lost. It reveals where complexity has been allowed to accumulate without scrutiny.
Organisations that outperform treat profitability as a decision discipline rather than a finance output. They insist on insight that is specific enough to challenge assumptions, trusted enough to change behaviour, and embedded enough to influence daily decisions — not solely annual reviews. Crucially, they accept that early answers will be imperfect, and that directionally right insight beats precisely wrong comfort.
Many profitability initiatives fail because they stop at analysis. The leaders who pull ahead use profitability insights to change how decisions are made across the whole organisation, keeping every function pulling in the same direction.
The organisations pulling ahead are not necessarily those with the most sophisticated models. They are the ones willing to ask harder questions of their data and themselves:
Profitability insight, done properly, forces these conversations. It becomes a core organisational capability that equips teams with the tools to make informed, data-driven decisions.
Most organisations already have the data they need. The problem is that it is fragmented across systems, and they lack a coherent, trusted, decision-ready view of what it is telling them. The gap between organisations that continue to manage by averages and those that act on granular truth is widening. Seeing clearly is no longer optional. It is becoming a competitive advantage.
Our work with consumer products organisations consistently shows that the biggest profitability gains do not come from cost cutting. They come from clarity. When leaders can see where value is truly created, and where it is quietly being eroded, better decisions follow.