Starting Something

I have been blogging for a while (has it really been 10+ years?) about business and sales and the situations that arise in both. It’s been fun. I figured it was time to actually listen to some of the things I was saying and put them back into practice, again. As time passes and our work evolves it is easy to leave some of those things that we learned and enjoyed behind. To wit, a couple of weeks ago I opened my own little sole proprietorship business. I’ll spend a little time talking about it, what I learned, and what I relearned in the process.

First off, for those wondering, I didn’t quit my “day job”. I still enjoy it and need it to pay the bills, or more importantly pay for the medical insurance that helps pay for my son’s insulin for his Type 1 Diabetes. In case you were not aware, the price of insulin has increased one thousand percent in the last fifteen years. Yes, that means that insulin now costs ten times what it did then. But it’s actually cheaper now to make. Make of that what you will.

Without insurance it would be a significant financial hardship in addition the other problems it presents for him going forward.

In any event, I am still in the technology and services industry. I find that even though we can and probably should apply many of the things we learned before, to today’s issues, our new processes, outsourcings and corporate structures may make it a little more cumbersome to do so. We seem to have less and less capability to provide input into our own business decisions and directions in today’s process driven business environment. This is part of the reason I have taken on this additional endeavor.

The first order of business (if you pardon the blatant pun) was to get all the state licenses, company names and banking accounts set up. This is the equivalent of starting your company, putting your sign out on the door, and setting up the place where you get, and send your money. It needs to be separate from your personal finances. It would have been easier to just use the accounts we had, but if you are going to do it, do it right. It also makes it easier to keep score on how well, or poorly you are doing.

The business I chose was probably at the other end of the business spectrum from technology equipment and services. I wanted a full separation of functions. There can’t and shouldn’t be any conflicts of interest. This is strictly an after-hours business. I’m making game-boards and games out of various metals in my garage. I don’t think I can get much further afield than that from my day job.

Setting priorities and remembering whose clock you are on at any given time is a requirement. You cannot cheat those who are paying you when you are on their time, and you cannot cheat yourself when you are on your own time.

Like any good Product Line Manager, I had done my market research in looking at what types of similar products were out there (you truly can get just about anything from China, or eBay for that matter). I also looked at the relative prices to make sure that I could actually make a profit at the then going rates for competitive products (another business case). Finally, I looked at the various types of suppliers that I would need, both local and on the internet, for my piece parts. Thank goodness for Home Depot.

The next was acquiring the raw materials I would need to create the goods I would sell, as well as the equipment I would need to make and finish the products. These would be my sunk costs. Regardless of my success or failure, I will not get my money back from these expenses, unless I earn it back.

This brought up the first set of business cases. Do I go for the high-end expensive equipment that could make the work easier and help generate a higher quality product, or do I go a little less expensive, take a little more time, and rely more on my skills to save money, at least initially? I didn’t choose either end of the spectrum of equipment but did tend to go toward the less expensive brands and platforms to start.

I felt that these would get me started and reduce both my capital risk as well as my breakeven point for the business.

Then came the learning process. Just because I thought I had a good idea and a plan didn’t mean that I had it all figured out. As I started producing products the learning curve kicked in. I learned which components were better than others. I learned which manufacturing techniques worked best for me. After a few tries, I started to produce some products that I thought were of an acceptable quality level.

Now that I had products that I was happy with, it was time to see if customers would be interested in them as well. There were essentially two discrete paths to market for the products I was creating: Face to Face (F2F) at business and craft trade shows, and over the internet on the various electronic market places that were available. To start I selected the internet / electronic marketplace approach.

I made this selection for a couple of reasons: The start-up cost of this approach was minimal (basically the cost of creating a product listing on existing market place web sites), the charges were directly proportional to the amount you actually sold, there was a predisposed customer set that used them, and the mercantile systems (Credit card, charging, collection, payment) were already in place. The two I started with were eBay and Etsy. Both well known and respected

Trade shows require an investment / entry fee up front, regardless of whether or not you make any sales, as well as the investment of real-time attendance at the show in order to make any sales. I did not feel I could make these overhead investments at this point in time for the business I had chosen. They would also require some sort of Point of Sale (POS) system in order to conduct business with credit cards, the now preferred way for most to do business. I have signed up with one (Square, mainly again because the upfront investment was minimal, and the expense would only grow as my sales grew), but am still not fully operational yet.

I will continue to prepare and will eventually go to some of these F2F shows for a couple of reasons. One is to get the direct feedback from dealing directly with a customer. The other will be to test this channel to market for profitability. Could I actually sell enough at one of these shows where the profit (not the revenue) generated would cover the upfront costs of entry, and time spent and again provide profitability?

In addition, I needed to create a web site where I could both tell my story and display my products. This blog has been and is hosted by GoDaddy. I have written in the past regarding the quality of their service and support. Please look up “A Great Service Story” (March 7, 2019) for my views on them. I used them to create https://metalgames.biz/. They had some great tools to aid in the rapid set-up of the site.

Again, I held off on creating the commercial system for taking orders directly from my website due to the upfront costs associated with setting it up. Instead I opted for links from each product page to my Etsy site (https://www.etsy.com/shop/MetalGames?ref=ss_profile ) where I could take advantage of the existing commercial system. There may come a time where I do set up the Point-Of-Sale system on the web site, but for right now, I felt managing the business’ cash-flow was a little more important.

So, there we go. I’m now in business. https://metalgames.biz/ and https://www.etsy.com/shop/MetalGames?ref=ss_profile are both live and believe it or not doing business. It may be primarily for personal enjoyment, but that doesn’t mean I will not take it seriously. To date I have received two orders from eBay and four orders from Etsy. I don’t think that is too bad for having been up and operational for approximately three weeks.

This has brought up the next several issues associated with Inventory and Fulfillment when it comes to getting the product into the customer’s hands in a timely, efficient and economic manner. With such a small number of orders one would think that this would not be a significant issue, but it actually is. In fact it is a bigger issue than I had expected.

Marketing and Advertising will also be interesting topics for discussion.

All costs affect margins and profitability. Being a small business means that you cannot take advantage of any volume-based efficiencies, for either the components associated with production, or the costs associated with shipment and delivery.

I will go into these topics (and others) and what I learned about them some other time.

The bottom line is, that it is fun. Even though I am making games, I don’t want to treat it as a game. If it is going to be a business, even a very small one, it deserves the attention and respect that is required to make it successful. I’ll keep you all posted as this evolves.

Models

Automation has been a catch word in business for a long time. It has been and continues to be viewed as one of the best ways for businesses to go faster and to save money. I can remember when “office automation” was the automation or application that was the driving force for business. Now it seems to be words like “robots” or “self-driving / healing / whatever” or “artificial intelligence” and the like are the automation applications de rigueur. With this in mind I’m going to talk about models. Not the kind that walk down the fashion runways and seem to dominate all forms of social media (for reasons that I still can’t quite fathom), but the kind of models that can continue to help simplify and speed up business, in the face of an ever more complex environment.

I first learned about the value of models in the Economics courses that I took in college. It was put forth that the best way to learn about the various specific market forces was to create simplified models of the complex real environment. Once the various specific forces were understood, more and more complex models could be created where the primary and secondary interactions between these forces could be estimated or observed. Regardless of how complex you tried to make the model, it was always simpler than the real environment. It was also shown that a relatively simple model could provide a very accurate representation of the system and environment as a whole.

This drove the idea that you could create a model that could very closely approximate the real world. In this way you could get a very good answer to your economic question, without the significant over-head complexity, time, effort, etc., of trying to account for every possible detail. The most recent utilization of models for the representation of a complex system that I have seen are the various models that meteorologists use for weather prediction.

What I haven’t seen in quite some time is the use of models in business.

We are all aware to the “Fast, Good, Cheap – pick two” scenario of business. With continued focus on quality and costs, I get the feeling that “Fast” is paying the price (if you pardon the pun) in the equation. If you don’t believe me, just ask, or watch how long it takes to get a quote or price for any sort of technology product that you are either selling or buying.

I like to joke about “Gobeli’s Laws of Business” in positing how things should be. Sometimes it gets me in trouble. Sometimes it gets me ignored. Occasionally however, sometimes someone listens. This is similar to my wife’s reactions to my “Gobeli’s Laws of Domestic and Marital Tranquility”, except for the occasionally having someone listen part.  

My position for business is this, if it takes more than a business day – that’s eight hours, not twenty-four hours, to either create or receive a quote, it’s taking too long. You will find yourself at a competitive disadvantage. You had better find a way to speed up your quotation and pricing process. Because, while coming in second in a multi-contestant race is admirable, it is usually only the winner that gets the customer’s order.

As technology continues to be one of the primary drivers of product, business and market evolution, the ability to configure this new technology into usable customer platforms and applications continues to grow in demand as well. Again, if you don’t believe me, just look at the number of engineers that are involved in both the quotation and evaluation processes for any technology-oriented businesses. Engineers seem to be taking on a bigger and broader roles in the commercial process.

Needless to say, this concerns me.

In addition to the “Good, Fast, Cheap” product output trade-offs, there are also a couple of other business trade-offs to be aware of. They are the “People, Time, Money” input or resource trade-offs, and the “Sales, Finance, Engineering” internal business forces trade-offs. Strangely enough they all seem to be interrelated and roughly align as well.

“Cheap”, “Money” and the driving force “Finance” are obviously all related. This is a pretty simple one. “Fast”, “Time” and the driving force “Sales” are also related. Since sales is indeed a competition (for the customer’s order) getting there ahead of the competition can be seen as an advantage. That leaves “Good”, “People” and driving force “Engineering” as the third relationship. That also seems to make sense as it is the engineers that are concerned with the accuracy and “correctness” of how the technology fits together.

Now a days it seems that you cannot get a project started, a bid created, or a proposal reviewed without direct engineering involvement. This direction has the effect of creating a business bottleneck based on the number of engineers you have available for any activity at any point in time. It also limits the options available to business leaders.

In the “pick two out of three” business trade-offs listed above, if you have always chosen the “Good”, “People” and “Engineering” business force (for “correctness”) then you can only choose between “Speed” and “Money” (read profitability) as your second choice. While going fast is nice, making money is not negotiable. Without it you won’t be in business long. Hence “Money” is usually chosen over “Speed” in these trade-offs.

This is my long-winded, round about way of getting to the topic of models. Current mathematic and modeling techniques can be used to predict the location of a single electron (the sub-atomic, negatively charged particle – you didn’t think I would ignore physics entirely for this article, did you?), with respect to a single proton (the sub-atomic positively charge particle) at any point in time. With this kind of modeling capability and technology available, getting a price, or creating a quotation should be as simple as creating a few salient entries into the appropriate model.

Remember the Economics analogy. Models can be created as complexly, or as simply as desired. Also remember the goal of a quotation or pricing model: to create a price for a good or service, not to specifically engineer and configure that good or service. Up to now most businesses believe that the good or service must be engineered (and costed) in order to create a price (with acceptable / appropriate margin) for the customer.

Also remember that by and large customers do not care what it costs the business to deliver the desired good or service. As an example, I don’t think many people care what it costs an automobile manufacturer to create the car they purchase. They just want to know what the price is in relationship to the features and capabilities of the car.

Price modeling versus cost engineering can and would significantly speed up the quotation and pricing process for businesses and their customers. It would enable the customer to ask for several “what if…” prices and configurations. It would make things easier and faster for the organizations responsible for providing the price. It would simplify the process.

So, why isn’t this the usual case? Why does it seem that everything must manually pass through engineering, in some way, before it can be approved or released?

I think the answers are relatively simple, but the solutions are not. Change of this type, moving from an ingrained engineering process to the utilization of models for customer prices and quotations involves not only change, but the relinquishing of control at such a level as to cause some discomfort to the overall organization. No group knowingly gives up control of a process, even if it is for the betterment of the overall organization.

On a related issue, models are always an approximation of reality. There will always be small variances present between what the model generates, and what the engineer will manually create. This will always generate a certain amount of uncertainty, and no one wants or likes that.

Engineers will always argue that their manual engineering is always more accurate than a model’s price prediction. In some instance this may in fact be true. But one of the issues with manual engineering is that no two engineers do it the same way. If they did it would be much more easily modeled. So, despite arguments to the contrary, even manual engineering injects inconsistency into the pricing equation as well.

This is why most changes must be driven from the top down, as opposed to the much talked about, and often desired bottom up approach. Creating a modeled approach to engineering and pricing goods and services to customers will need to be driven from outside of the group that is currently responsible for performing these functions. Remember, that given their choice, an engineer will always search for a way to engineer a solution, regardless of the commercial ramifications of that approach.

Utilizing a price modeling approach to generating customer prices and quotations will re-inject “Speed” back into the business output and business resource trade-off equations with a minimal effect on the accuracy and quality of the price generated. With speed, comes a competitive advantage that should be translated into more orders, without incurring incremental costs or reduction in quality.

And isn’t that what automation is supposed to be all about?

They Don’t Have to Buy

Sales is a very interesting profession. It may not require a specific type of person, but I think it requires a specific type of mind-set. It has been shown that people more readily buy from people that they trust. You have to fully believe in and be committed to what you are selling in order to gain that customer trust. You must be the first to be convinced of what you are selling, before you have any kind of a chance of convincing a customer. If not, you have a tendency to come off as an archetypal used-car salesperson, and no one seems to trust them.

There was some research done some time ago that showed that there actually was a “smell of fear” that could occur. When scared the body does emit chemicals that that can be sensed by others. (https://www.telegraph.co.uk/news/science/3545435/The-smell-of-fear-is-real-claim-scientists.html)

I think that there probably also exists a “smell of insincerity”. Just as it may be possible to sense fear in others, it is probably also possible to sense insincerity in others. And for a sales person, insincerity is probably the worst thing for a customer to sense. There is that trust thing again.

That means that the first person that a sales person must convince of the benefit of the product or service that they are selling is themselves.

Having been in sales I can vouch for the fact that it is difficult enough to sell anything in the face of competition, let alone sell a product that you are not fully convinced of or believe in. And if you don’t fully believe in what you are selling, you will come across as insincere. And as I said, like fear customers can sense insincerity.

So, why am I going into all this discussion regarding sincerity and trust, and whether or not a sales person has convinced themselves that they believe in the benefit of the product or service that they are selling? There are a couple of reasons. The first is as I said good sales people are convinced of the benefit of their product or service. This is a good thing.

The second is that just because the salesperson is convinced of the benefit of the product or service they are selling, does not mean that the customer will be convinced of the value.

First, let’s do a few definitions. Today’s source will be the Merriam-Webster dictionary:

Definition of benefit: Something that produces good or helpful results or effects or that promotes well-being (https://www.merriam-webster.com/dictionary/benefit)

Definition of value: The monetary worth of something (https://www.merriam-webster.com/dictionary/value)

So, while the first step in a successful sales process is convincing the sales person (or sales team) of the benefit of a product or service, the second step is convincing the customer that the benefit of the product or service is at least worth the cost required to obtain it. That would mean that the monetary worth of the benefit is greater than the amount that they are paying for it. This is the value.

Too many times I have heard and seen sales people who have been convinced of the benefit, and who have communicated this benefit to the customer, believe that their job is then done. This point in the sales process is usually denoted by when the salesperson utters the phrase:

“They have got to buy.”

This phrase is usually accompanied by qualifiers along the lines of:

“The customer’s competition is doing…” or

“The market is moving or responding…” or

“The technology is ready…”

These are all non-commercial, or non-value related reasons as to why a customer should make a positive buying decision. Let me illustrate with an example:

Let’s say you are looking to buy a new car. You have your own set of reasons for wanting a new car. Perhaps your old car is worn out. Perhaps you have decided you now need a sedan instead of a coupe. What would your response be if you heard the following when you went to the car dealership:

“All of your neighbors are buying exotic sports cars.”

“The car market is moving toward and responding to exotic sports cars.”
“The technology associated with exotic sports cars is the best and highest available.”

I’m guessing that unless you were going to the dealership with a specific interest in buying an exotic sports car, it really wouldn’t mean that much to you, and depending on the approach and ferocity of the sales person, it might actually dissuade you from buying anything from that dealership.

Yet it is an approach that many marketing people and teams create for their goods and services, and it is belief that many sales people and teams seem to adopt.

The point I am making is that no customer has to do anything. Just like the car buyer in the example above doesn’t “have” to buy a car. (My guess is that they used a perfectly viable car to get to the dealership in the first place.) Most customers are looking for something that they deem, using their specific product priorities, to be better than what they currently have.

However, the “better” or the benefit of the new product or service buying decision is still only half of the Cost – Benefit equation, which results in value. Just as exotic sports cars may be able to go twice as fast as other cars, there may be question regarding their value if they cost ten times as much as those other cars.

There will be a market segment that is interested in going twice as fast as everyone else. These will be the customers that will look at the twice as fast for ten times as much value equation and find it acceptable. But just because this segment sees the value does not mean that the rest of the car buying market will as well. That is why there seem to be so few high-speed exotic sports cars on the road.

It is very risky to extrapolate market niche applications into market wide acceptance.

With most products, it is usually technology and its evolution, that drives new products into the market. The idea that the new technology can create greater benefits can be a significant market force. But just like the new car replacement question, new technology must replace and supplant the existing technology in the market.

This means that there (usually) already exists a viable product and technology in the market. The new technology must create a greater benefit at a price point that makes sense for the customer, or they will not make the positive new buying decision.

This is not the case for “new” product-technologies with no existing capability or analog. Examples of this would be items such as Ford’s Model T (replacing the horse), Sony’s Walkman (possibly replacing the boom box – now there is an old phrase), Apple’s iPod (replacing the Walkman), or more recently Cellular Phones (replacing radio phones). These are products that created new markets, but once created they followed the technology evolution path with a good example being the iPod’s displacement of the Walkman as a personal music listening platform.

Much has been written about this technology evolution-replacement-benefit relationship. Roy Amara was an American researcher, scientist, futurist and president of the Institute for the Future best known for coining Amara’s law on the effect of technology. He coined what has become known as Amara’s Law. It goes:

“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” (https://en.wikipedia.org/wiki/Roy_Amara)

This law has become known as the basis for what has been called the “hype cycle”, as coined by the Gartner Group, to represent the maturity, adoption, and social application of specific technologies. The hype cycle provides a graphical and conceptual presentation of the maturity of emerging technologies…. (https://en.wikipedia.org/wiki/Hype_cycle) It is depicted as follows:

Circling back around to sales people and their selling of products, it would seem that they are the first group to go through the Hype Cycle since they are the first group that must be “sold” on the product or service before it hits the market. They are the first to see the benefits and experience inflated expectations. But since they are selling instead of buying, that is all they can truly define as they do not initially have good information on the relative costs and values of purchase in the customer value equation.

Unless it is a new market defining product, all defined benefits are “relative”. That means that the existing product in the market already has established a baseline of customer benefits. Each new iteration or generation of the product (hopefully) brings incremental benefits. The value equation for each customer is the balancing of the incremental benefits of the new product versus the incremental cost of obtaining it.

Sometimes the value of the benefit outweighs its cost and buying occurs. Sometimes it does not. Regardless, it is a very rare instance where a customer “has” to buy a product.

With this in mind, I would suggest that most buying decisions can probably be delayed by all customers for an extended period without their experiencing much if any deterioration in their market position. In today’s economically uncertain business environment, I would not be surprised if significant purchases of any kind are delayed, even if only for a little while. This may be due to the realization by customers that in today’s environment they do not have to buy every iteration of new technology to remain competitive.

I suspect that I too will probably be delaying on my desire to buy a new car in the near future as well, mainly because right now I don’t have to buy one.

Moving

Moving, or changing offices by and large, is usually not very much fun. In business it entails gathering up all your stuff, putting it into standard moving boxes, which are not much more than over-sized, glorified shoe boxes, and going somewhere else. It can be in the same building or across the country. You are essentially out of commission from the time you start putting your stuff into the boxes, until the time that you have taken it out and reconnected to the network. It adds stress to an already crowded calendar.

Long ago, when I first joined the corporate world, I read that on average you moved or changed offices every two to three years. I actually tried to look up this article to properly cite it, but, alas I couldn’t find it. Perhaps it has passed from fact, to just something that everyone knows.

You either changed roles, or business units, or assignments, or were promoted, or any number of other events that resulted in you having a new place to sit while doing your job. This was back in the days when you came into the office to work. Everybody came to the office to work. Working at home wasn’t so much of an option then.

The idea back then was to generate synergy in an organization by having groups of similarly focused individuals sit together and regularly interact in the expectation that they would be more efficient, creative and powerful as a group then they would be as discrete individuals. It seemed to work, at least back then.

I think a lot of this idea was based on the sports analogy where it was demonstrated that having all members of the same team, working together and running the same plays, were far more effective than if they all acted as just talented individuals and did what each thought was best. It was widely accepted that the best teams won, not necessarily those that just had the most talented athletes. However, I think it was Roy Williams, the basketball coach at the University of North Carolina, who said: “I can coach them to play better basketball. I can’t coach them to be seven feet tall.” So, talented athletes are still very desirable.

There were many positives and some negatives associated with this co-located and hence almost constant office moving phenomenon, for both the individual and the business. As I said earlier there is a disruption to your ability to execute your responsibilities while you are moving. This affects your, and those that are dependent on your productivity. At least for a while. This was and, in some instances, still is debatable based on some roles and activities that I have seen.

On the business side there is the cost. There are two basic costs associated with all this moving. The lost productivity that I have already noted, and the cost of the team and staff of resources that were constantly planning and executing these moves. Depending on the size of the business location, there had to be a small army of people available to bring boxes, and then move and transport boxes to the new location. There had to be a logistics team working with the Information technology team to make sure that connectivity and communications were available, at the appropriate time at the new office (or cube) location.

Moving was not cheap. Therefore, it was expected that the synergy that co-location generated had to be good enough to offset this cost. For the most part it seemed that it was.

Another good thing about moving was that it presented the opportunity to go through your stuff, take stock of what you needed and throw away all the rest. It was sort of a forced purging opportunity. As an aside, I have a friend who used to take pride in the thirty to forty boxes of stuff that he took with him whenever he moved. He is an engineer and believes that there will come a day when he will need some of the documents or calculations that he has created over the last decade plus for something else he may be working on.

It hasn’t happened yet, but I am sure he will be prepared. Like I said, engineer.

The periodic purging associated with a move was the opportunity to get rid of stuff, primarily paper-based communications and documentation, when it was no longer needed. I have hit the point that if I haven’t looked at something in the last year or two, then I don’t need it. I think this is probably a good rule of thumb for everyone. Also, with the increase in machine and cloud storage capabilities, a hard copy of just about anything can seem to be a little bit of overkill.

You don’t know how much it pains me to say that. But just as I have had to change with the times and move from the tactical joy reading of actual physical books to using an e-reader, I have gone to reading a screen instead of printing a document. And they said that dinosaurs couldn’t evolve.

Organizations have also done their part in trying to reduce the costs associated with moving. Initially they started limiting the number of boxes that you could have / they would move. Now as we continue to move toward more and more of an “open office” concept, where no one has a defined office, there is also the requisite limitation on the amount of stuff that you can have based on what has now become a limitation on the amount of physical storage that is available.

If you don’t have any place to put it or store it, then you are forced to get rid of it.

The result is that what used to happen every two to three years, and cost both the individual and the corporation a lot of money in employee discomfort and lost productivity, as well as the maintenance of a staff the size of a small army to assist in making these moves, are now both essentially gone. In the open office environment there is no defined office to move either from or to. Storage for the physical accoutrements of an office have been so minimized, and document retention has now been virtualized that there is no longer any significant amount that ever needs to be moved.

The office itself has also been virtualized. There are now both remote offices and home offices in addition to the open offices. It seems now that if you want to keep any “stuff” you will probably have to keep it in your home office. I tried this once. Then my wife complained about all my clutter. I told her it was what I needed to captain industry. She told me to get rid of it.

I personally think she was in cahoots with the corporate Workplace Resources group in this regard. Though, admittedly the home office does look cleaner.

But, I can’t help but wonder, if businesses saw such a value in the concept of having everybody actually physically work together, to the point that it outweighed the costs associated with making sure that they could work together, what happened to that value? Economics teaches us that there is no free lunch. The cost – benefit analysis of business is based on the same principles. There is a cost or investment for every benefit you get. 

Has someone, somewhere gone through the analysis associated with virtual / home / open offices and compared the hard, recognizable cost savings with the somewhat softer and much harder to quantify lost synergy values. In the past it was believed that the synergies outweighed the costs. Was everyone wrong for so long and now those ideas no longer hold true?

I think the answer lies in the “hard” cost and “soft” value equation that I mentioned earlier. It is easy to define how much is saved when most of the costs associated with moving offices are eliminated. It is a number. It exists in a budget. When it is reduced or cut, it can be tracked.

The same cannot be said for the values generated by having people work together in the same office as opposed to “virtually”. I think everyone believes there is a value associated with that type of working environment, but I is almost impossible to quantitatively put a hard number to that value.

You can estimate it, but that is never as good as a well-defined cost reduction. The result is that a definable cost has been reduced, and an undefinable value has also been reduced. But since the value was undefinable in the first place, the amount of reduction to it is also undefinable.

I really didn’t like moving offices all those times that I had to do it in the past. I think that we are going to dislike what we may have lost by not having to move anymore.

Conflicting Internal Forces

I have talked in the past about the three internal organizational resources required for business success, and their trade-offs and interrelationships: Time, People and Money. The idea that if you have less time than desired to achieve a goal, it will require the expenditure of more people and more money to achieve it. If you have fewer people for the goal it will require more time and money. And so on.

I am now going to talk about the driving internal functional forces that are acting upon desired organizational goals. There are again three of them and to put them at their simplest, they are Sales, Finance and Engineering. I think in order to be a little more accurate it would be better to look at the conflicting goals of each of these functions with respect to the desired goal of the organization, instead of just the function itself.

The goal of sales is to get orders. There may be additional sub-requirements placed on them, but it is almost always quota attainment, as it pertains to orders, that is the measuring stick for sales. Achieve your sales order goal as a salesperson, and you get money, fame, glory, respect and most importantly, you get to keep your job. Fail to achieve your sales order goal and you don’t get the money, fame, glory or respect. More importantly, perhaps the first time you fail you may get a pass on keeping your job, but probably not the second time.

Sales in general doesn’t really care about finance or engineering. This is primarily because they are not paid to care about them. They are paid (usually in the form of commissions) to get orders. Sales usually wants the highest quality and lowest price possible as this helps enable their sales. The greater profitability desired by finance usually means a higher price, which usually makes sales more difficult. Sales will usually align with engineering on generating the highest quality solution but diverge when the costs of such solutions are taken into account.

The goal of Finance is margin or profitability. Again, there may be other sub-requirements, but finance’s primary role is to make sure that the organization brings in more money than it spends. Finance keeps score. It’s not enough to just bring in more than you spend. Finance quantifies how much more money needs to be brought in than is spent so that the business’s ongoing and future success can be assured. Future investments and corporate overheads (as well as salespeople’s salaries and commissions, etc.) have to be paid for.

Finance is usually focused on what could be called the margin percentage versus margin value balancing act. It is desirable to have a high margin percentage and high profitability on each sale. However, having high margins with low volumes will not generate enough profit to drive the business forward. Just as a high volume of sales with low margins will not generate the desired margin value. There is a desired financial equilibrium where both margin percentages and values are maximized.

The goal of Engineering is to make sure that everything gets done right. Engineering makes sure that products and solutions are configured properly. They make sure that components and solutions are available in the desired time frames. They make sure that services are costed and allocated correctly. In short, they make sure that the organization can in fact do whatever the salespeople are trying to sell.

Engineers are also believe that they are the primary group responsible for doing the people, time, money, analysis. Engineers are not usually interested in the sales aspect, other than recognizing if there are no sales there is no need for engineers. And they are not particularly focused on finances, as margin and profitability again have little direct effect on them. They are usually focused on the accuracy of the solution and will include whatever they deem appropriate (the people, time, money resources) to that solution to make it ever more accurate.

Of the three functions, sales is probably the most difficult. Sales is competing with external entities for each order, in addition to trying to balance the internal goals associated with the financial and engineering functions. Finance and engineering are only associated with internal functions, including sales. There is no competing engineering or finance function claiming that their financial wizardry or engineering prowess is superior. When they are forced to deal with external forces, it usually only through sales.

When these internal functions, and their associated goals are in balance, an organization can operate at near its peak efficiency. Sales pushes for orders, finance makes sure the sale is profitable and engineering makes sure that the sold solution is done correctly. Life can be good.

It is when an organization gets out of balance that we start to see significant issues. When an organization becomes too sales focused, margins and profitability can begin to slip as the quickest way to increase sales is to reduce price (this is just baseline economic theory). We saw an example of this some time ago when some stocks started being valued based on the assumptions of future sales and sales growth instead of the more standard stock and organizational valuation criteria. These stocks eventually came crashing down when it was realized that they would in fact have to start making money if they wanted to stay in business, regardless of how much they sold.

When an organization becomes too financially focused, growth, expansion and development can slow, again causing issues for the organization. Strategic opportunities can be missed because they may be deemed to either represent too much risk, or not enough return (margin) to be pursued. Being too safe from a financial point of view can be just as deadly to an organization as being too risky and focused only on sales.

With the increased global awareness and focus on the “cost of non-quality”, or more accurately the cost of not doing things right, there seems to now be an organizational drift toward becoming more engineering focused, since they are the organizational force associated with doing things right. I also think that this approach potentially has the greatest capacity for generating corporate issues in the future.

When an organization becomes engineering focused it has a tendency to lose sight of both sales and finance. With decreased input and parameter focus from sales and finance, engineering will continue to focus on accuracy and reducing the risk of an incorrectly engineered solution, almost to the point of trying to generate perfection in its solutions.

The issue here is that perfection usually comes at a very high cost.

Finance will continue to try to demand specific margin levels, while sales will want lower prices to enable the generation of orders. This is the recipe for the perfect organizational storm. Engineering generated increasing costs, finance generated desired margin levels, and sales generated reduced pricing demands to meet the market competition.

The point here is that the market, more or less, sets the market price for the organization’s goods or services. There can be some variations, sometimes based on the quality of your sales team, sometimes based on the quality of your solution, and sometimes it is based on other factors (such as the regulatory exclusion of a competitor from the market, etc.). If you raise your prices too much in response to the engineered increase in costs, sales volumes and hence margin values will decline. If you reduce margin percentages, again margin values can decline. This can become a lose-lose situation.

The organization won’t make any mistakes, but it may not generate enough business, or margins to survive for very long.

In allowing an organization to become engineering focused, you start down the road to becoming a cost-up pricing organization. This is the least market responsive type of organization. Since engineering nominally has no focus or interest in sales or margin, when an organization becomes engineering focused, it becomes almost entirely internally focused.

It is usually the position of the market that an organization that loses its focus on the customer or the market, doesn’t get to enjoy the benefits of that customer or market for very long.

Engineering in an organization is about reducing the risk associated with achieving a goal. But like everything else, this risk avoidance comes with a cost. It is not enough to tell engineering to make sure that the solution is correct. This direction invariably leads to the inclusion of all kinds of failure avoidance constructs, and their costs to be included in the solution. And since engineering can be a complex function, there are few outside of the engineering function that can understand or question it.

In the long past world of “Five Nines” of reliability, this was once the recipe for success, but in today’s “short life-cycle” disposable product world, few can afford it, and even fewer are willing to pay for it.

I mentioned earlier that engineers see themselves as the group that is responsible for solving the Time, Money, People resource equation. It is obvious that when none of these parameters are set, the solution is much easier to obtain. And without limits to these parameters, the costs of the risk-adverse solution can grow quite large. Organizations need to understand that the Time, Money, People equation requires parameters to be set. Time frames and budgets need to always be set before being handed to engineers to configure a solution.

Engineering is a key component to any solution. The functional internal conflicts between sales, finance and engineering will always come into play, and must always be balanced out. As organizations seem to continue to drift into a little more of an engineering-centric approach to customers and solutions, it should be safe to assume that left unchecked, the commercial and financial aspects of these solutions will re-emerge in the customer decision making process.

It is safe to say that you do indeed get what you pay for, but it is also safe to say that sales will have difficulty selling, and customers are probably not going to be willing to pay for an over-engineered solution of any type that does not take into account their commercial needs.

The Territorial Imperative

“The Territorial Imperative”, or more correctly, “The Territorial Imperative: A Personal Inquiry Into the Animal Origins of Property and Nations”, was written in 1966 by Robert Ardrey. It along with the “The Naked Ape”, or again more correctly “The Naked Ape: A Zoologist’s Study of the Human Animal” which was written in 1967 by Desmond Morris, are probably the first two books I read that were not written by Theodor Geisel, more commonly known as Doctor Seuss.

I didn’t choose to read them at that time. They were assigned to me one summer. I was getting ready to enter the fifth grade and attend a new school. I was told that they were preparatory work that needed to be completed before I could go to the new school.

I personally thought this concept sucked at the time, as summers were supposed to be school free, and here I was being required to read a couple of books.

What is interesting to me is that now, all these years later, these books and the topics that they covered are now coming back to me in the business world.

Initially both of these books were considered somewhat ground breaking in that they sought to explain the source of some human behaviors. Till then man (man as homo-sapiens the species, not man as a gender, for those of you who might have been getting ready to go full scale gender bias ballistic on me) was viewed as primarily a cognitive creature. What these books examined was the idea that man was also driven by certain instincts which also affected its behavior.

This was pretty radical and somewhat heady stuff for that time period. I’m pretty sure that as a would-be fifth grader I didn’t fully grasp a great deal of what the authors were trying to get across. I knew that it made me feel somewhat funny though. That is funny-strange, not funny-haha.

For those of you who have not read The Territorial Imperative, the following is a quick synopsis:

“It describes the evolutionarily determined instinct among humans toward territoriality and the implications of this territoriality in human meta-phenomena such as property ownership and nation building. … Ardrey posited that man originated in Africa instead of Asia, that he is driven by inherited instincts to acquire land and defend territory, and that the development of weapons was a fundamental turning point in his evolution. The Territorial Imperative further explores these ideas with a special emphasis on man’s distinct preoccupation with the concept of territory. It goes on to elucidate the role that inherited evolutionary instinct, particularly the so-called “territorial imperative”, plays in modern human society in phenomena such as property ownership and nation building.”

https://en.wikipedia.org/wiki/The_Territorial_Imperative

More simply put Ardrey posited that one of man’s driving instincts is to own and defend territory.

With that idea in mind, now look back at every business organizational structure and office / cubicle arrangement and apply this thesis to it. It ought to be somewhat enlightening. It also ought to explain why, when we are hired on, we are given “our space”, be it a desk, or cubicle, or whatever. It is now our physical, as well as metaphorical territory. We instinctively know that we must “work” in order to defend it.

As we matriculated up through management we acquired larger physical territories (bigger cubes and eventually offices) as well as larger spans of control over others and their cubes and offices. These territories were then defended against both internal and external competitors.

But it seems that times are changing. At least when it comes to office space. Business organizations have started to move away from the concept of the business territorial imperative. Office size and location are seeming to be done away with as companies move to the “Open Office” concept.

In the open office structure, no one has any more territory that anyone else. In fact, there are no specific assigned locations of any kind. Instead of having “your” desk, cube, office, territory, it is first-come first-served in the seating arrangements. Desk, or more accurately table-space is shared. There is no distinction between levels and spaces. It is positioned as egalitarian and a better office structure for all those involved.

It seems to me that the more things change the more they stay the same. I was looking at some old pictures of office spaces in the 1950’s. It was some pretty interesting stuff. Below is one that caught my eye, primarily because it was in color. Most of the rest of them seem to be in black and white. For comparison’s sake, I didn’t want to try and compare a black and white photo to a color one. Take a look.

This is the modern office, circa 1958. That’s more than sixty years ago. It’s neat. It’s orderly. It’s “open”. What is not to like about it?

Now let’s fast forward a little more than sixty years to today. Here is a look at what is called a “Mezzanine Floor” open office design.

Except for a little better photography and perspective use, I’m not seeing a whole lot of difference, read “progress” here.

The difference is that in the 1950’s you had “your space”. You were assigned a desk. As small as it was, it was your territory. That is where you went to work. Now, you don’t. In the “open office” you can come in and sit anywhere. If you are promoted and given more responsibility, or assigned a new role, you still come in and the same rules apply. You come in and sit wherever you choose.

I don’t know how good or bad, this new (or in this case “old”) open office concept is going to be. I haven’t had the opportunity to try it out yet. But it appears that I will have this opportunity soon. I am going to be interested to see how this return to the past is going to work and how it will affect a workforce that has not been in this environment before.

Many people I know have said that they have in the past or are now currently working in such environments. I also notice that a very high percentage of them now “work at home” in a home office. This high correlation between open office environments and working at home is probably just a coincidence.

Really.

It is probably also a coincidence that “your” home office is a fixed location within “your” home.

The Territorial Imperative was a ground-breaking book. It submitted that man, while being a reasoning creature was also driven by certain instincts, one of which was to define its own territory. It was shown that the defining and defending of these territories was one of the basic drives, and a significant driving force in human growth and evolution.

Maybe I am reaching, but I find it interesting that the same principles could be applied, to a greater or lesser extent in organizational and office dynamics. I also find it interesting that we seem to be in the midst of a period where organizations appear to be actively removing this behavior driver.

In the past, the “trappings of office” were recognized as one of the driving forces that was a cause for people to input that extra amount of effort. You wanted the bigger office. It was a symbol of your success.

I guess on the other side of the coin, your bigger office might have been a symbol of someone else’s lack of success. In today’s age of participation trophies and ninth place ribbons, the desire may not be so much to remove the symbol of success, but to remove the symbol of the lack of success of others. I guess if everyone sits at the same sort of desk, with the same amount of space, with no predefined location, no one can feel bad, or good about their territory, or their apparent lack of it.

On the other hand, in today’s hyper-competitive business environment, reducing the office space allocated to each employee, regardless of relative organizational position, might be a pretty good way of reducing what was once thought to be a relatively expensive fixed cost.

It is interesting that the reintroduction of an office environment that was evolved away from, more than half a century ago is being viewed as a “new and improved” (to borrow from most new products advertising mantras) step forward. It will also be interesting to see how it changes office behaviors.

Will there be an increase in the flight from the office to the home office? Will there be a reduction in the commitment to the assignment and the company on a greater level since there will no longer be a defined territory associated with the office? Despite these and other potential questions, as well as the recent research that shows such open office environments are not particularly conducive to organizational productivity, (“The impact of the ‘open’ workspace on human collaboration”, Ethan S. Bernstein and Stephen Turban,  Published:02 July 2018 https://royalsocietypublishing.org/doi/10.1098/rstb.2017.0239 https://doi.org/10.1098/rstb.2017.0239) I think we are all going to get the chance to experience the open office for ourselves. We have seen that man is an adaptable species. He lives in igloos in the arctic and grass huts in the rain-forests, and just about everywhere in between. I guess he can try working in an open office as well.

The Choice Not Made

I do not know of any person that doesn’t make mistakes, with the possible exception of my mother. And my wife. And my kids. And maybe my dad, but not according to my mother. Maybe I ought to start over.

I know I make mistakes. I try not to make many of them, but according to both my mother and my wife, I am a guy and therefore I will not be able to help myself when it comes to making mistakes. I have witnessed many others throughout my career in business who have also made mistakes. Not all of them were guys. Go figure. Some to a lesser and some to a greater degree, but errors have been made. But that is okay. Usually, in order for an error to be made, someone first had to make a decision. And business is all about making decisions.

When a decision gets made there are pretty much just two choices that can then occur. You can have been right and made the right choice, take a bow and move on, or you can have been wrong and made the wrong choice, in which case you can either blame the decision on someone else, and / or take actions to rectify the situation.

It is only in politics where you can rename a wrong choice as the “alternative correct” correct decision, based on the then alternative facts, and keep moving along. In business you have to eventually fix things and clean up the messes that wrong choices create. There are always Finance people around keeping score.

In business two characteristics seem to be prized above all others. The first, and somewhat lesser of the prized traits, is the ability to make the right choices. The ability to make correct decisions. Management likes this capability, but they only seem to like this ability to only a certain extent. That extent is usually equal to their own ability to make the right choices and decisions. Being right has a tendency to cause others who may have been wrong, some discomfort. Nobody likes to worry that they made the wrong choice and having someone around who makes the consistently right choice can occasionally be problematic.

Being right sometimes can cause you to take an opposing view to what may be desired for the business, even by management. Being right means that by comparison, someone else was wrong. And as I said, very few people enjoy being wrong.

The second and absolutely most prized characteristic in business, is the ability to be able to quickly clean up and correct the situation after someone else has made the wrong choice. I have written about these types of people before. They are called “firefighters”. And like their real-life equivalent hero counterparts, they are viewed as corporate heroes. Having someone around who can come in and quickly right a wrong choice is a highly valued resource to have.

I have actually been in meetings and training sessions where designated corporate firefighters have come in and spoken about how to go about triaging, correcting and cleaning up a situation.

While I recognize and absolutely salute those heroes that put themselves in harm’s way when it comes to firefighting, I am also a big fan of Smokey The Bear, who uttered the immortal words:

“Only you can prevent forest fires”

Fire prevention, as it relates to business has always been my goal. It is far less glamorous than flying in and putting out the fire, but it is far better for the business to avoid the fire instead of having to put it out. Looking forward and anticipating needs and issues are the best way to avoid the flare up of a firefighting situation. This topic is worthy of much more analysis and discussion, but it is not the one I want to cover here.

To this point I have talked about making right decisions and choices, and the potential pitfalls associated with them, And I have talked about making wrong decisions and choices, and the teams and activities that can be inaugurated as a response in trying to correct them. Just about any wrong decision or choice can be rectified once it is identified. Once they are identified just about any wrong decision can be corrected.

It is the interval between the decision and the start of its corrective actions that usually determines the magnitude of the issue and the magnitude of the resources that will be required to fix it. The sooner the identification the cheaper the cost to fix. This by the way, is the essence of all this increased interest in Agile and DevOps project methodologies. I’ll probably write about this sometime in the future as well. Remember, just about any wrong decision can be fixed.

Just about.

The one decision that cannot be fixed is the choice not made.

As process and the fear associated with making the wrong choice has grown, the willingness to make those sometimes difficult choices seems to have atrophied as well. One need only look at our current political situation to see this phenomenon play out on a much grander scale. In politics making a decision or making a choice makes you somewhat vulnerable. Those that don’t agree with your choice can now take an opposing position. Since the results of a political decision, much like a business decision are not visible for some time, support for the choice can weaken and changes can be made.

As a result, it is becoming easier and more acceptable to defer these needed decisions and choices to a later time. They are then the choices that don’t get made. Instead of making the right choice and moving forward or making the wrong choice and then taking steps to correct it and then again moving forward, no choice is made and no movement, forward or backward occurs.

The result is then, that nothing gets done.

I included process in the list as one of the causes of choices not being made because process by its very design does not lend itself to making decisions. Process tells you what the decision should be. Process supposedly makes the choice for you. The safe path is to now always follow the process. If the situation may call for a change in process or a different decision, it will always be easier to not make that choice.

The risk of making a wrong decision that is outside of the defined process will almost always outweigh the benefit of making the right decision. Decisions are responsible for change. Change is what drives progress.

If you are not going to make the choice, you can’t fix the problem. The right choice fixes the issue. The wrong choice lets you know what the right choice should have been, and again allows you to fix the issue. The choice not made doesn’t fix anything.

Herein lies the conundrum. Almost every organization and business without exception will categorically state that want their people to make choices and take risks. They will then systematically implement processes that reduce the opportunity to make decisions and choices, and then provide a series of rewards and punishments that result in a deterrent to taking the risks, making the decisions and choices that organization says they want them to take.

Sun Tzu was a Chinese general, military strategist, writer and philosopher who lived in the Eastern Zhou period of ancient China. Sun Tzu is traditionally credited as the author of The Art of War, an influential work of military strategy that has affected Western and East Asian philosophy and military thinking. (https://en.wikipedia.org/wiki/Sun_Tzu)

I have talked about Sun Tzu in the past. His book “The Art of War” was written close to 2,500 years ago and is still taught in military academies around the world today. He is renowned for amongst other things, never losing a military engagement. If he felt he was not assured of a victory, he would not commit to the engagement. He would stall and feint and execute other tactics. If these actions did not result in a more favorable position for him he would either accept a stalemate / draw, or he would withdraw.

Much of what he discussed has also been applied to business in the past as well. The difference between Sun Tzu’s approach to not engaging, and a process-based approach to not engaging, is that Sun Tzu made an active decision. He made the choice not to engage. He chose to protect his men and resources and pick a different time and place to engage when the contributing factors were more to his favor and liking.

In business (as in politics) today the incentive appears to be to not engage, even if the correct choice is available. Because if someone is correct, invariably someone else is wrong. Even if success is probable, there will always be at least a small risk present for failure. The only way to assure that you are not wrong is to not make choices. And while the choice not made may appear to be the safest one for the individual, it is probably the worst one for the organization.

There are some really great quotes on choices out there. The one I think I will leave you with is from Jim Rohn, an entrepreneur and author. He said:

“It doesn’t matter which side of the fence you get off on sometimes. What matters most is getting off. You cannot make progress without making decisions.”

Esoteric Value

“Don’t sell the steak. Sell the sizzle.” is a sales canon that dates back to The New Yorker Magazine in 1938. Elmer Wheeler is the man credited with coining it. It seems Mr. Wheeler was one of the first pioneers in persuasive selling. He was one of the first to recognize the value in presenting a customer the choice in buying one thing or another thing (something and something) instead of the choice of buying or not buying (something and nothing). He was successful. Sales teams have been trying to emulate him, and his success since.

His approach works well when dealing with an end-user customer. The person buying the steak, or getting their oil checked, or buying a malted milk (these were actual examples in the 1938 article) can readily be replaced by those purchasing Mobile Phone packages, automobiles or Television / Internet packages for their homes. It is still about buying one thing or another, not about buying or not buying. These are consumers making discretionary purchase decisions.

For the most part these are all examples of Business-to-Consumer selling opportunities. The person buying is the person using the capability being sold. It is when you start looking at the idea of Business-to-Business selling that the concept of “sizzle” can become a little more esoteric. In business, there are very few discretionary purchase decisions that get made. It is usually decided that you can use it to make money or save money, or you don’t buy it.

Businesses for the most part are financially or profit driven. I say for the most part as there are several that purport to serve the greater good, and by their designation as a “Non-Profit” organization enjoy a different tax treatment. There are also those that are regulated as to how much they are actually allowed to charge and or make as a profit. Even so, these regulated firms are also somewhat profit driven.

What they are not is “sizzle” driven.

Yes, it is true that organizations are made up of people that can be influenced by something other than profitability, but the organization as a whole, through is management structure, its purchasing process and more importantly in many instances, its stock price will not be “sizzle” driven. Being fashionable or exciting or being a market or technology leader is interesting. It may have some ephemeral effect on the organization, or how the market perceives it, but in the end, it will be the financial performance of the company that dictates how it ultimately is perceived.

If you want to stay in business, profitability will be key. It is about making money, and about how those things that the organization purchases can be used to make more of it, this quarter, this month, today.

Steve Jobs is famous for many quotes. Part of one of his more famous quotes contains the following line:

“Our job is to figure out what they’re going to want before they do”

This is spoken like a true technology genius, especially when he is referring to a set of consumers and end-user customers that are not technology geniuses. Jobs was brilliant at anticipating consumer “wants” (as opposed to needs – no one “needs” an iPhone, or an iPod, etc.) and then putting together a product package that would then create a new market.

He identified what you would want and then created the package that you wanted it in. Like I said, he was a genius.

However, when you are working with businesses, it is somewhat different. The businesses normally require something called a “business case” (see what I did there? Business – business case? It’s important.) before they are going to spend money on anything, whether it is a new hire, an internal development, or an externally supplied product or service. It has to make business sense, or more simply put, it needs to generate more value for the business than it costs the business to do.

There is a myriad of ways to describe the generation value for a business, but I have found that they can usually be simplified down into one of two categories: Value can be created by enabling the customer to generate more revenue, or value can be generated by enabling the customer to reduce their costs. Both of which usually result in greater earnings and profits, which ultimately increases the value of the company (usually in the eyes of the shareholders or owners).

Many times, companies like to tout their future capabilities when selling to other companies. It is important to have a direction and strategy for the future when talking to customers. They too want to know where their suppliers are going and what they expect the market to need or want in the future. But there is a significant gap between the value of a business case for today, and the value of a business case for the future.

The business case of today involves products and services designed to meet defined requirements, solve existing issues and deliver present value in the form of increased sales or reduced costs. The needs exist. The products exist. And the relationship between them can be well defined. The amount spent, and the value received, either immediately or over the defined period of the business case can be calculated. It is truly the decision between buying one vendor’s solution and buying another vendor’s solution (again, the decision between buying something and buying something else).

It is when new products or capabilities are introduced ahead of or in anticipation of the business customer’s need, that the business case relationship can become somewhat esoteric.

When trying to anticipate the business customer’s future needs, the impetus is on convincing them that your specific view of the future is to correct one. They must then balance that out against their customers needs, wants and desires to see if that anticipation makes sense in the form of a business case.

Many times, there can be a general consensus among the supplier organizations about what the future state of an industry may look like, but unless that vision can be quickly converted into increased customer revenues, or reduced operating expenses, the future solution will have to wait. Most organizations can no longer afford to spend money in anticipation of what they think their customers will need or want. They would rather wait and make sure it is what they need or want.

Remember present value is always better than future value.

Part of the issue with “future” products is that they don’t necessarily translate to definable value. They are usually described as “platforms” for the future, or that they will enable “future applications”. In short, they don’t clearly define and quantify how the business customer is going to generate new revenues and how much those revenues might be, or how they are going to reduce their costs and how much those cost reductions might be. They have only half of a defined business case. The purchase or the cost half.

They do not have the benefit half of the business case defined.

Without the definition of those future applications or services or values or cost reductions it is difficult to make a case where an organization will feel comfortable spending today’s money on an undefined future value. In short, very few businesses will gamble today’s money on an undefined future value. It makes much more sense for them to actually wait on the future than to bet on the future.

As I said earlier, companies are in business primarily to bring value to their shareholders and their owners. The do this by generating earnings and profits. They do that generating greater value on products and projects that the money they spend executing them. They make more money than they spend on these ventures.

When a business is trying to sell a good or service that cannot clearly define the value that it will generate for the customer, either in the present or the future, it always makes more sense for the customer to wait on that particular buying decisions. This is the definition of deciding between buying something and not buying (buying nothing).

Regardless of the sizzle that a company may claim that accompanies their product or service, in the case of buying today based on predicted future needs and capabilities, the steak, and its relatively definable value will usually be of much more interest to the business customer. Especially when it comes time to review the value generated for the customer. And even more so when that sizzle is still just a future sizzle.

Customer Wants

Sometimes, events in the universe just conspire to align themselves in such a way that a topic to write about becomes painfully self-evident. Such is what has happened over the last little period of time for me. I was the recipient of several surveys asking me as a customer, what I wanted. I also had the opportunity to read several surveys that had asked other types of customers what they wanted. These current events brought back recollections of past events that had already conveyed this topic into such clarity some time ago for me. I am of course talking about talking to customers, and more specifically what customers want.

What customers want is usually viewed as the holy grail of business conduct. If you can figure out what they want, you can create a product or service that will satisfy their desire. You can become famous and respected as a scion of business. You can be somebody.

One of the most popular methods for finding out what customers want is through the afore mentioned surveys. Another is industry forums and workshops. Yet another is actually talking to them face to face and just asking them. As I mentioned, I have recently had the opportunity to both read about and to some extent participate in these types of customer interactions. People had gone out, identified the customers, and asked them what they wanted. And lo and behold, they told us.

We now knew what they wanted. We could design and build the future around these responses. We had the information. We had the answers. We were off and running.

Not so fast.

Long ago in a galaxy far, far away, I was once responsible for a business unit within a company. I had taken the adage to heart. I had created a users’ group so that I could talk directly to my customers and understand what they wanted as well as what was dissatisfying them. It worked great, for a while.

Most of the time the problems, issues and requests that we discussed were well known to both groups, the company as well as the users. We prioritized them, focused our abilities, and instead of trying to solve them all at once, we solved a few at a time and made measurable progress. As we took the major issues and dissatisfiers off the list, they were eventually replaced with more and more arcane topics. They were still dissatisfiers, but not on the same level as those that we had already dealt with. Soon we found ourselves starting to try and prioritize and work on the arcane as opposed to the well-defined issues.

We surveyed the customers to try and understand “what they wanted”. They were not shy. We hadn’t put any limitations on what their responses could be, so they told us what they wanted. They had gone through a prolonged period of getting many of the products and issue resolutions that they were looking for, so their expectations were high regarding what our responses would be.

The subtle change that had occurred was that we were now specifically discussing things that they wanted, where in the past we had been working on topics that needed to be worked or corrected. These were now “want” to haves, as opposed to “have” to have topics. There is a different commercial model when it comes to correcting issues or providing already committed functionalities, then there is when it comes to fulfilling customer wants and desires.

We started discussing the parameters for the commercial model associated with fulfilling their desires. We started to ask them for money in order for us to deliver what they wanted. What they wanted was so arcane, and technically complicated, they we started asking for a lot of money.

The next users group meeting came along, and naturally, this issue was a major topic of discussion. The customers were unhappy. They were dissatisfied. They were not getting what they wanted. It came time to have “the talk” with them individually, and as a user group in general.

We set up the session and cleared the agenda. We started off by making sure that we had in fact properly scoped and defined the specific desired capability that they said they wanted. We wanted to make sure that we were answering and addressing the proper topic. We had.

We then asked the question that hence forth has always accompanied any time in the future that that I have asked a customer what they wanted. We asked:

“Are you willing to pay for what you want?”

It is easy for anyone, customers included, to come up with a list of things that they want. The issue here is always two-fold: Are you willing to pay for it? And, do you have enough money to pay for it?

Usually when customers are surveyed about needs, wants, desires, there is little in the way of a perceived economic model accompanying these questions. Wants invariably well exceed available budgets and the ability to purchase these wants. The different relative costs associated with the various desires can have a significant effect on the priority with which the customer views them.

A good example would be a survey about cars. You can be asked what kind of car you would want. You may “want” an exotic super-car. They are nice cars. You may not have enough money on hand, nor the desire to re-mortgage your house in order to buy an exotic super-car. Even though you may want one, you may not be willing to pay what it costs to buy one.

Such is the issue we ran into way back when. We asked only about “wants”. Such is the issue that seems to continue to plague more recent industry survey and customer communications.

Getting back to my historical lesson, most of the customers agreed that they would be willing to pay something for their desired functionality. It is interesting to note here that I said “most”. There were some that were not. I think by now you know where I will be going with this.

I then shared what the order of magnitude estimate was for the company to develop the desired capability and explained that even though it might be contrary to common opinion, we were a “for profit” organization. The stockholders were funny that way, and sort of insisted on it. Based on the business case and the relative number of interested customers, we then shared an order of magnitude individual customer price for the desired capability, based on the assumption that all interested customers would purchase it at the estimated price.

The majority of the customers indicated that they were not interested in the capability at the estimated price. We then looked at the remaining customers and indicated that their price would go up in proportion to the number of customers that were no longer interested in purchasing the capability.

The result of the discussion was that we publicly addressed the dissatisfier and quantified to the customer what it would cost them to be satisfied, and then mutually decided that we would not develop and supply the customer desired functionality. We would instead work with them to see if there were work-arounds or other methods of addressing the desired functionality.

During the course of this interaction it became clear that what customers want is indeed an important aspect of the process of creating customer satisfaction. You have to know what they want. Many times, it is within your ability to provide it, and to provide in such a way or at such a price point that it makes sense for all involved. However, as technology has evolved, and as budgets continue to tighten, sometimes the usual economic model will not work.

In today’s business climate, any time that you are looking to have interactions with customers regarding “what they want” as a method of gaging which products to create or which strategic directions to pursue, it will probably be in everyone’s best interest to include questions regarding if  that customer would be willing to purchase that desired product or functionality, and what specifically (at lease to a rounded order of magnitude) what they would be willing to pay for it.

All customers have a list of wants and desires. If you only ask them about those wants and desires you may find yourself trying to design and build products, services and functionalities that customers may be unwilling to purchase, even though they may want them. I think the number of people that may want an exotic super-car is far greater than the number of people that are actually willing to pay what it costs to buy one. I’m pretty sure about this because as I drive around in my distinctly non-exotic super-car, I see so many others driving around in their non-exotic super-cars.

As an aside I can’t believe that so many other people actually wanted all those minivans that they are driving around in. Perhaps that will be something to analyze in a future edition.

I think that we all need to be aware of what customers want. I also think that unless we normalize these wants with information regarding which wants they are willing to pay for, and how much they might be willing to pay for each one, we can lead ourselves into some difficult business situations.

Good, Fast, Cheap and the Future

I was casting around for a topic to write about. I had several candidates. Whenever I get an idea I write down the basics of it in my notebook. This happens to be a real notebook, with paper pages and a bound cover. Not a computer. I very rarely type at a moment’s notice, but I sure can pick up a pen and scribble with the best of them.

In any event what finally tipped the scales toward this topic was the NCAA selection committee’s decisions on who gets to play in March Madness (who gets to go dancing as they say) and who doesn’t. It wasn’t so much the actual selections that got my attention, as it was all the hype and fury that goes into the prognostications associated with filling out the tournament brackets and predicting the winners, losers and future match-ups.

It seems that what comes next is of more than passing interest to some people.

Being in a technology-based industry, in an increasingly technology-based world, I have been doing some reading as to what comes next in technology as well. It may seem like a stretch to compare filling out your NCAA March Madness bracket to predicting what comes next in technology industries and business sectors, but there you have it.

I have read and seen many methods used for predicting the next steps in our technological future. Some are internally focused (business focused). Some are externally focused (customer focused). I saw some that were citing universal constants and the laws of physics as the driving factors. Anything that equates physics to business always intrigues me.

But as I thought through all of the hype and hoopla surrounding predicting the future, as I stared somewhat forlornly at my unfilled NCAA bracket, I realized that while I had absolutely no idea beyond what I saw on ESPN regarding who’s who in college basketball, I had been in business and the technology industry for a while, so maybe if I relied on that instead of what others said I should rely on, I might be able to make some sense of what was coming.

Despite every pundit’s proclivity to try and make things seem complicated, I have found business to come down to, and be reasonably explained by the holy trinity, as it were, of business: Good, Fast, Cheap. I think these are the factors that affect and in effect, can be used to predict the future.

Simply put, they are: Good, or quality. Fast or speed of acquisition or delivery. And Cheap, how much you are willing to pay.

Now I agree that there are other influences, such as governmental regulation, and social and environmental consciousness, and even marketing and advertising, but I think Good, Fast, Cheap dominate the decision and prediction landscape. I’ll look at a couple of disparate industries to see if these ideas hold true.

The auto industry is always one of my favorite industries to look at. It has changed from a labor intensive “we’ll tell you what kind of car you’re going to buy”, to an automated, highly competitive customer driven, “We’ll tell you what kind of car you’re going to make if you want our business” industry. That’s what makes it fun to look at.

It is well known that there are market segments within both the automotive industry and its customer base. These tiers are based on car size and pricing levels. Smaller economy cars, all the way up to larger, more luxurious cars. This is because not everyone has the same level of “Cheap” or price. However, there are various sub-markets that do seem to behave similarly based on this factor.

Fast, for the most part, is going to be a given for cars. Dealerships abound, and interestingly enough seem to occur in close proximity to each other. This means that you can go in, compare products relatively easily, and select and drive home with your purchase. You can’t get much faster than immediate gratification.

That leaves Good, or quality as to what I would expect the primary differentiator to be, at least for now within the automotive industry. This is where things can get interesting. If you can’t spend any more money than you can afford for a car, and you can’t get it any faster than now, the perceived quality of the car will be one of the major, if not deciding factor on what you buy.

Yes, I know design and style, etc. are going to come into play. Have you noticed how similar in appearance cars within the same market segment look. If you don’t think so, look again.

It is interesting (at least to me) that the New York Times noted that General Motors first offered a Three-Year bumper to bumper warranty in 1989. https://www.nytimes.com/1988/09/17/style/consumer-s-world-for-1989-new-cars-and-warranties-come-in-all-lengths.html

Now such warranties can extend to six-years and in some instances 10-years, and I would suggest that they are viewed as a competitive advantage / disadvantage capability.

Now Elon Musk and Tesla have created a very high quality, electric car, and they are challenging some of the status quo in the industry. And the industry is reacting, as all competitors work to bring out competitive electric models as quickly as possible. But again, I would position that the economics of quality will be the driving factor of what the future holds for the automotive industry.

Now I’d like to look at the technology industries. I’ll focus somewhat on communications and networking, but I think much of the topic will be applicable across most technology industries.

Good, or Quality used to be the driving force in communications. Reliability, redundancy, etc. were the required thresholds to cross. But they cost money and they took time. People learned that they could get “Good Enough” for a whole lot less than what they paid for Good. I have referred to this as the race to the bottom. How low a quality for how low a price was acceptable. It turns out in retrospect, pretty low.

It seems now that there are generations of people who have never known high quality communications, or anything other than disposable platforms and devices, so they have no baseline to compare to. To them Good Enough is all they have ever had, so it is acceptable. So that leaves Fast and / or Cheap as the driving forces for the networking future. Maybe.

I also think that Cheap has also run its course in communications. Who here remembers when communications providers would “give” you a mobile phone as part of your service agreement? They don’t do that anymore. In fact, it seems that they have now established an upper boundary for what people will pay for a phone, in addition to their service contract. That limit seems to have been explored by Apple and its iPhone X at around One Thousand Dollars. https://www.theverge.com/2018/8/21/17763322/iphone-x-galaxy-note-9-smartphone-pricing-2018

That brings us to Fast, or speed of availability. It has been approximately Ten years since the last generation of wireless capability (4G) went into trial and delivery to the market. https://en.wikipedia.org/wiki/4G 5G is now just hitting the market as well, but probably won’t see ubiquitous coverage for another year or two. The speed we are talking about here is measured in years, if not decades.

The last major evolution / revolution in non-wireless communications, be it the analog to digital, digital to Internet Protocol, or the advent of cable providers entering the non-TV communications market, has also been years if not decades in the past.

So where does that leave us? The Good (quality) of communications has already been taken down. Can it go lower? Maybe, maybe not. The Cheap of communications has already been taken down, hit the floor, and started to bounce back up. This is obviously in response to the communications providers desire to continue to make money and stay in business. The Fast of communications has never been that fast to begin with.

I think it is going to be a combination of “Good” and “Cheap”. Quality is already low. However, if we are to believe the new applications and uses of communications, quality will probably have to come back up. I don’t know about you, but I don’t think I want my self-driving car operating on the quality of networks that we have come to accept as “Good Enough”. Either that or the definition of Good Enough is going to have to be revised upwards, drastically.

Basically, this means that people will be expecting more, but probably will not be willing to pay more for it. The past technology iterations will have already taught them this behavior.

Cheap, as I said has already hit the bottom and seems to be coming back up. But not everyone will want or need the “luxury” service. Many will want, or only be able to afford the “Economy” service. I think you will see in far more granularity than is available now, a tiering, or set of communication strata put in place, very similar to what we see with the automotive industry: Luxury models to Economy models.

The issue will be that how do you create communications networks able to deliver Luxury to Economy levels, that are priced at levels that are already ingrained in the user’s market segment? That would mean that the capability to deliver Luxury would have to be built, but the ability to deliver Cheap, where desired or required would have to be available.

I think the technology to be able to deliver this type of capability is in development now. I don’t think the “Cheap” capability of the service providers being able to make money on that type of technology-based capability has quite been worked out yet. It will cost the providers a lot of money to build this capability. This will probably engender a price that their end user customers are probably not willing to spend. That and it will probably a fair amount of time before the technologies are truly available. I think we have an economically induced wait in order to see what’s next, at least in communications.