Now that my great friend Pasha and the team from Russia has taken over majority of the day to day running of our company, my mental resources has been freed up. I could thus focus more of my attention on sales and marketing. One of the first things I keenly felt was the law of scarcity and the idea of competitive advantage.
Simplistically modeled, the time and effort of Pasha and team is what we term resource. This particular group of resource is very effective when applied on solving problems of a technological nature, most especially on complex technological problems. This resource is less effective when applied in the solving of other problems, for example cooking rice. To get maximum effective when it comes to the problem of cooking rice, it is advisable instead to engage the help of a housewife. In other words, a unit of Pasha's time will generate 100 items of technology or 1 bowl of rice, while the same unit of a housewife's time will generate 1 line of workable codes or 100 bowls of rice.
The philosophy of my operation is to generate maximum value for our society. Since Pasha has a competitive advantage in producing codes and a house wife has a competitive advantage in producing rice, Pasha should concentrate on producing technology while the house wife on cooking rice. This in a nut shell is what is called competitive advantage. It would be stupid of me to deploy Pasha and team to cook rice and the house wife to do programming. It would mean an overall drop in value that society in general could enjoy.
The laws governing economics can never be bent or broken, they are very real. To have continued access to a certain pool of resource, be it the type used that solves complex technical problems or the type that cooks rice, we need to maintain it with another kind of resource called money. Failure to generate money in worst case scenario would result in health issues on Pasha and team since there is no more money for rice, hence no more resource to solve complex problem, or in the latter example would mean no more rice to eat since the house wife runs off with another man. Squandering or inefficient utilization of resources would result in the depletion of such resources in the short run and a lack of it in the long run. This ties closely with the idea of competitive advantage. If Pasha and team focus on solving complex technological problems, they will generate more value for society than they would cooking rice. Thus they would get more monetary resource for the upkeeping of their health doing programming. If the housewife focus on cooking rice instead of solving complex technolgical problems, she will generate more value for society than she would solving technological problems. Thus she would get more monetary resources for the upkeeping of her health cooking rice.
Everyone have some kind of problems. Due to the law of scarcity, everyone has limited amount of the resource called money however much they claim to have it. It is everyone's desire to solve their problem with as little as possible the use of their limited resources. It is everyone's dream to have their problems solved without the utilization of their own resources. However we live in a real world where the law of scarcity is very true. It is naive to believe one can gain something from nothing.
There are only a few cases I can think of which proves contrary, they are:
- By act of God (only God can bend the iron clad rules of economics. However to ensure against end of the world, chaos and the collapse of the system he built, God does not do this. He instead resorts to the manipulation of the very rules he created which often means he gets his hands tied as well.)
- If one lies and cheat (this is a short lived tactic, what goes around comes around)
- One thinks one is indeed getting what one wants but is however having this mistaken believe (which is usually the case, hence all the scandals)
As mentioned the above three tactics are either exceptionally rare or short lived.
To sustain this pool of resource, I thus see the job of the sales and marketing personal as one who seeks out target audiences with a certain set of technologically based problems. Next I see myself as a function which which fulfills two very important roles in this value chain.
- Reducing as much as possible the required resources from clients
- Ensuring continued availability and prolonged life span of Pasha and team by utilizing their time and effort on problem sets with the closest fit to their capabilities.
It is unrealistic to engage Pasha and team to solve a problem with no renumeration of the resource called money. Something cannot come from nothing. Pasha and teams still needs rice to eat. However it is hard to convince a client to part with his resource so as to exchange for a solution. To solve the deadlock, it is important to next introduce the concept of pain.
The degree to which a client feels pain at not having a solution is the degree to which he is willing to part with his current resource for a solution to the pain. To fulfill role 1 and 2 concurrently, I came up with another rule:
- Pasha and team's time are most efficiently used when employed on problems which there has not yet been a solution for and is extremely painful to the client if not solved
An assumption and also a third role for myself:
Assumption :
There are already solutions to a sub set of problems that is causing pain to the client
Role :
Find the cheapest solution with the closest fit to the problem that is causing extreme pain to a client at the same time utilizing Pasha and teamonly when absolutely necessary.
These set of rules when applied by the role that I assume allows for some really interesting possibility.
Profit maximization scenario:
Offer the same service that other vendors are offering but with less cost incurred.
Market penetration scenario:
Offer the same service that other vendors are offering but at a cheaper price and with less cost incurred.
Value Maximization scenario:
offer the best possible service to all clients at the cheapest possible price and the lowest possible cost.
In accordance to my guiding philosophy, we are currently operating in value maximization mode. Already signs are showing that competitors are not able to produce the same results at the price we are offering. While Pasha and team is not overloaded with work, the cost of production is kept low. This move is in accordance with the philosophy of Kaizen (muri, muda, mura)
Muri (unreasonable) happens if Pasha and team is expected to fulfill the entire requirement set at the price offered to the client. This would mean Pasha and team being under compensated for the value they generated to society, in worst case scenario being unable to sustain themselves.
Mura (uneveness) happens if the results of operations are inconsistant. While we already do have a well defined operating process in place, we are still constantly incorporating new practises into the value chain to further even out our work
Muda (wastefulness) happens if the time and effort of Pasha and team is utilized for solving problems that has already been solved by someone else on the web. This is avoided by the adoption and non-charging of freely available plugins from the web that fulfills the requirement subset of clients.
Such a strategy when applied in the long run would mean a lean and effficient operation model that imposes the least amount of pain on all involved in the entire value chain while generating the maximum possible value for our society.
Taking a step back one might say I am simply being the middle man that does not add value to the value chain. Such is not true. Let examine this in terms of competitive advantage again.
We simplistically model this again. Pash and team being highly specialized in technical work generates 100 technological items, 100 existing technological mapping to customer needs or 50 sales per unit time while me being the jack of all trades generates 90 technological items per unit time, 100 existing technological mapping to customer needs or 65 sales per unit time. My existence in the value chain frees Pasha and team up to generate the maximum amount of technological items possible, since I took charge of the technological mapping to customers needs and the sales. In essence, the amount of value I generate in the value chain is a function of the three components:
- The amount of money the customer saves
- The amount of time Pasha and team saves
- The extra amount of money Pasha and team makes with the time saved due to more effective allocation of their time and effort
In general everyone resents the middle man who contributes nothing but leaches much from the value chain. It is impossible to get something for nothing in the long run. Information being so efficient nowadays makes the non value addding middle man redundant really fast. However due to the way this operation has been structured, both the client, Pasha and team will require my presence in the value chain.
Thinking further, I am now considering the possibility of retaining a specialist who has a competitive advantage in closing sales. Ideally, he or she should be one who can generate 50 technological items, 50 existing technological mapping to customer needs or 100 sales per unit time. Such a specialist would be a nice fit to the team.