What is a Profit Pool? Definition and meaning

Profit Pool

Definition: a Profit Pool is the total profits earned at all points along the value chain of an industry. The term was coined by Gadiesh and Gilbert in 1998.
Their PP model can be used to help managers (and their firms) focus on profits, rather than on revenue growth.
The idea behind it is: managers need to look beyond revenues to see the shape of their industry's PP. In this way, strategies can be created which result in profitable growth.
The structure of a PP is usually quite complex. The pool will be deeper in some segments of the value chain than in others, and its depth will vary within an individual segment as well.

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