Top-line growth is essential, but without improving margins, profitability can stall. Margin improvement means generating more value from every dollar of revenue, enabling reinvestment in innovation and resilience. Without margin gains, growth isn't sustainable.
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Rethinking process can dramatically transform how a business operates and performs—and this is where margin improvement happens. Use value stream mapping and Kaizen events to understand current state processes, outline opportunities to improve, and define new future state processes.
Key questions for margin improvement:
When evaluating any investment request, ask: Will it save us time and money? Expect clear, monetized answers supported by logical and logistical facts. Push back and demand clarity on the business case and financial return on the investment over a defined time period.
Here's a reality every CEO must face: the ongoing level of investment required to support your company's technology debt directly impacts your margins. Understanding the IT 70-20-10 Budget Principle is crucial for margin improvement.
70% of a typical budget is consumed maintaining systems and technology deployed in the past to deliver yesterday's value proposition. This "keeping the lights on" cost consumes the majority of any IT budget—necessary investments in software, hardware, services, and employees to keep it all working.
20% of a typical budget goes to necessary enhancements required to support legacy technology and keep up with business growth. This funds upgrades to keep services current, keep regulators in check, and malicious events at bay.
That leaves only 10% of a typical budget for new investments to drive the business forward. This is where the margin improvement opportunity lies.
Margin improvement comes from operating excellence, cost optimization, better asset utilization, and thoughtful financial leverage—all while protecting quality and customer experience.
To improve IT margins for example, technology managers need to create strategies that increase investment levels for new technology by freeing up human and financial capital:
By embedding margin improvement into your transformation strategy, you give your organization the discipline to focus only on what truly matters and the confidence that each investment creates sustainable competitive advantage. Not only is this smarter spending—it's exciting for everyone involved because it frees up resources for growth and innovation.
Dave Brady is CEO of TurningPoint Consulting, where he helps leaders deliver transformations that are ambitious, grounded, and defensible—the kind that stakeholders will thank you for long after the work is done.
