The PIMS® beginnings
Profit Impact of Market Strategy (PIMS®) is a project that uses empirical data to determine which business choices make the difference between success and failure. PIMS® is used to develop strategies for resource allocation and marketing. Obviously one of the most surprising findings is that the same factors work in the same way across different industries, countries and decades, which makes it ideal for strategic benchmarking. PIMS® “yields solid evidence in support of both common sense and counterintuitive principles for gaining and sustaining competitive advantage” Tom Peters and Nancy Austin.
The project was originally conceived by senior managers in General Electric. They wanted to know why their strategy of investing in “large, growing and profitable markets” had resulted in multibillion dollar losses in the IT market. Under the direction of Sidney Schoeffler, an Economics Professor hired by GE for the purpose, the PIMS® project was launched in the 1960s as an internal empirical study. The aim was to see what could be learnt by comparing across GE’s large and diverse portfolio of strategic business units (strategic benchmarking).
Since GE was highly diversified at the time, key factors were sought that would have an impact on economic success regardless of the product. ROI (the profit per unit of tied capital) was used as the measure of success. In 1972 the project was transferred to the Marketing Sciences Institute (then under the wing of Harvard Business School), which extended it to other companies. Following various buyouts, it is now part of Malik Management in St Gallen, Switzerland.
The PIMS® database
The database gives each PIMS® consultant currently over 25,000 years of business experience at the SBU level (i.e. where the customer interface takes place and where marketing and investment decisions are made). Each SBU is characterized by 500 factors over a period of 3+ years. The companies in the PIMS® database contribute financial data as well as information on customers, markets, competitors, and operations on their companies at the SBU level. The SBUs in the database are separated into eight classifications: producers of consumer durables, consumer non-durables, capital goods, raw materials, components, or supplies; wholesale and retail distributors; and providers of services. Specific companies and industries are not identified. Each SBU profile includes financial data from the income statement and balance sheet, as well as information about quality, price, new products, market share, and competitive tactics.
Connect with our experts
We would be delighted to meet with a leadership team to give an overview of the PIMS® Strategic Benchmarking software, and to explore how you might structure your SBU definitions to best benefit from participation.