For what client is willing to pay for?

Value Adding

I was in a marketing class when I had a transformative experience; we were introduced to a new idea that jolted a deep rooted faith. It unfolded like this; we were discussing “what is Value Add?” and several of us spoke about our understanding but the final conclusion was that “Value Addition” is activities for which client is willing to pay. And it had a very important corollary, Non-Value Adding activities are those activities for which client is NOT willing to pay.

My earlier philosophy was that a company must do what it believes is required– irrespective of whether the client is willing to pay for it or not. I believed that cost of such activities for which client is not willing to pay for should be added on top of the cost of activities for which the client is willing to pay for. However after paradigm shift, I started believing that non value added activates should be at best be eliminated!

Steve Jobs once famously quoted “When you’re a carpenter making a beautiful chest of drawers, you’re not going to use a piece of plywood on the back, even though it faces the wall and nobody will ever see it. You’ll know it’s there, so you’re going to use a beautiful piece of wood on the back. For you to sleep well at night, the aesthetic, the quality, has to be carried all the way through.” But this quote didn’t have any meaning for me.

A few days back, I was at a very famous 5 star hotel for my holidays. My family and I were awestruck at the beauty of the hotel – the architecture was phenomenal. On the last night of our stay, we invited our relatives for dinner and we were thoroughly impressed by the hospitality and comforts. After a sumptuous dinner; my wife and I walked our guests to their bike. We had a good walk until we reached the basement – When we reached the car park we realised it was a different world! It was at best shabby.  Then we walked to the bike parking and the situation worsened – it had instructions all around – parking at owner’s risk, don’t leave helmet on the bike etc… We felt bad that such a beautiful hotel had such a bad basement. It was dirty, no paint … plain ugly! It hit us more badly when we realised this parking was mainly for the employees who took such good care of us! It also made our guests go to a place so bad before they could get to the restaurant.

I felt why did the hotel leave the place so bad? I stumbled upon the fact that normally clients never get to this place! We never had before! We left our cars to chauffers for parking!

What do MOST clients pay for? Food, beautiful rooms and corridors, hospitality… Those are all top class! Who cares about comfort of the employees and their parking? So it becomes a “Non-Value Adding” activity and cost.

Uberization, The next frontier for Innovation

Capture

Uberization is a metaphor for phenomena where mobile technologies are leveraged to connect a buyer and a seller by creating a digital marketplace for services; eliminating the traditional middlemen, who could be playing the role of an aggregator or capital provider or logistics/infrastructure provider etc.

Capture

I consider Uberization as Industrial Revolution 3.0 because of its disruptive ability and ability to drive next phase of productivity gains, which is now getting stagnant. It essentially eliminates the middlemen thereby creating more margin for seller and lesser price for buyer without any loss of quality to the service. The fact that the buyer and seller are closer also increases the ability of seller to customize product more by understanding their needs better. Also the digital marketplace is highly scalable and thus a proven model can be taken across geographies rather quickly. Online market place also provides benefits that an aggregator traditionally provides such as brand awareness and consistent and unique value proposition. It also could help meet compliance requirements and bring discipline to the market once it takes sufficient scale.

Are there flipside to it? Yes of course! Recent times I have seen some; Uberization empowers the buyer and the seller and it expects them to use the power judiciously. Also Uberization is a new phenomenon and Law and order is still catching up to protect the seller and the buyer. This makes the buyer and seller more vulnerable. A segment of buyers and sellers are still having change management challenges and have not adapted to the new ways of operating. This has led to multiple channels of order for seller; complicating the value chain.

Despite the challenges, Uberization is the way to go because dream of every nation is to create a society where there is minimum inefficiency between the seller and the buyer and Uberization delivers on this promise.

Designing for what?

Today I took a long walk in Paris. It was a wonderful evening walk and just after rain had cleaned the city and rejuvenated the river.

I saw many Monuments, different building designs, different looking cars… and I found them rather odd. I wondered why they were designed the way they were. I felt may be they were designed right way but they look odd to me because I am not used to seeing things that way; may be I am used to seeing things a particular way and those ways are the ‘right’ ways in my mind. May be I should get out of my concepts and change the definition of right more broadly.

Well then what’s a right design? How do I get away from my bias?

Design that meets a purpose is right design. So what is the purpose and should the purpose be right for design to be right? At the outset, it seems apparent that if the purpose is right, then perhaps the design that meets the purpose too is right!

Let me check my heuristic on what is the most common purpose in India?

  • Efficiency?
  • sabse kum may sabse jyaada?
  • Usne bola… woh samajh daar hai… (par mujhse kum)

I don’t have a very strong heuristic for what purpose drives Parisians but one thing is evident, there is a need to be ‘different’. May be sometimes, when there isnt much to ‘better’, ‘different’ is just fine.

How do you say if a company is rotting from inside?

Hastinapur

Hastinapur was a great nation. It did not go down only because of Duriyodhana’s ills but also because its internal defence mechanisms were getting rotten. Same could happen to a company; here are some tell-tale signs:

Sl. No.

Characteristics of falling Hastinapur in Mahabharata

Corresponding symptoms of a Rotting Company

1 People in key position such as Bhishma Pitamaha, Dronachariya, Krupacharya … recognised the issues but none felt they were bound to fix the same; rather they convinced themselves that they cannot do anything about the issues and found solace in cribbing People in key position openly talk about the ills but continue to work their own way ignoring any new sign.
2 Everyone knew that Shakuni was culprit but no one could do anything about it Everyone knows who is spoiling the party but no one decides to do anything about him/her/them
3 It was Duryodhana’s way or highway In meetings, “Who said” becomes more important than “what was said”
4 Good deeds of Pandavas weren’t rewarded and bad deeds of Kauravas weren’t punished Above par work of individuals goes unseen and below par work if individuals is ignored
5 Duryodhana commanded the army and the sages while Pandavas had to go figure out theirs through alliance and prayers Some people seem to have more resources than they can chew and others are left with no resources to put their ideas to work

Once could argue that, every company has some level of challenge in above four. Perhaps its the level of challenge rather than presence of absence of them.