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Hi. Alan Stratton here from Cost Matters dot Com
I love helping businesses model their operations to improve profit by finding where they are
losing money and don’t know it. It is very rewarding both to my customer and to me. Concepts
and principles embedded in Activity-Based Cost are an excellent guide.
A while ago, I worked closely with a software company who provided modeling software. I
helped the company’s clients create their business models. There were several other
associates working similar issues with the software company. Modeling projects required
two major aspects: Leading teams to discover and define relationships; and Integrating
data from customer systems into the modeling environment. Business modeling uses a lot
of data to define and express important relationships. Both aspects are value adding and personally
rewarding. Leading the client teams was always different
as each client was different. But my associates and I found we were using
similar data integration processes over and over again. A common term for this work is
“Extract, Transform, and Load” or ETL. Each of my associates and I developed almost
a library of standard routines and techniques to manage data so it could be used in models.
It seemed like a perfect opportunity for the software company’s development team to standardize.
I approached the software engineers with the problem and the advantages to our customers.
It seemed like a perfect opportunity to help customers, add value, and reduce the effort
required to model their businesses. I was shocked by the engineers’ response.
“If we did this, then you and the others would not have as much work to do.” “It
would reduce customer consulting revenue.” While both statements are initially true,
they miss the mark. It would reduce the work we did in data manipulation. It would reduce
consulting revenue. However, data manipulation was a major hurdle
for clients to overcome. Ongoing data management and its expense caused many clients to discontinue
their modeling efforts. If this effort could be minimized and be accomplished by less expensive
personnel, how much more revenue from new clients and ongoing support could have been
realized? How much more customer satisfaction could have been realized? How much more time
could we as consultants then spend helping clients benefit more from the model, integrate
good costing concepts, make better decisions, and make more money?
From my own point of view, while I enjoyed the data manipulation, leading teams to discover
relationships and use model outputs was much more personally satisfying. I would be willing
to forego ETL revenue to order to expand effort in other more value-adding areas.
Our efforts were not useless. But paraphrasing Peter Drucker, there may be nothing so useless
as earning revenue where we should not be earning at all. What is best for the supplier
should also be what is best for the customer.
So what are you doing very efficently that should not be done at all?
Please share below this post at Cost Matters dot com.
When Cost Matters, Profits Soar. I'm Alan Stratton from Cost Matters dot Com THANK YOU