For what client is willing to pay for?

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

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.

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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.

Even before you start a Consulting Assignment

As a HR consultant I work with several companies simultaneously and design HR solution that fits the client. It requires me to understand client’s priorities and business situation and culture as quickly as possible. Of course we talk to clients to understand their priorities but what is said is not always sufficient. Here are a few things I do to understand my clients better:

  1. Understand the industry in which the company is operating and see what kind of advice is given in whitepapers focused on the industry. Check how the market operates – fragmented or monopolistic
  2. Look at the annual document to understand how much does the company speak about its people. Most companies write about their people challenges and goals
  3. Look at company’s attitude towards its vendors and stakeholders. It could tell if the company is trying to be dictatorial or friendly as a way of operations
  4. Check what kind of reports the company delivers to its leaders. The MIS team can quickly share at least their templates
  5. Look up for its policies such as maternity/paternity, education breaks, IJP (Internal Job Postings). It will demonstrate how much cost the company is willing to bear for employees
  6. Understand the company’s supply chain and how the company makes its margin. Identifying the source of its margin gives an idea on what will sell with the key stakeholders. Key to margin may be prudent capital management, R&D and Innovation, Capital, Control or licence, size and scale of operations etc.
  7. What does the company’s clients really want from the company? May be cheaper product, convenience, and exclusivity.

Seldom do we get time to do the right thing and we end up focusing mostly on the urgent things. Avoid the trap to improve your effectiveness as a consultant and start spending some time on understanding the client. This will save time from iterating solution and winning client’s trust.