Report on ITA Breakout Session – Making Value Pricing Work for You

This is the fourth in a series of postings about my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<—I love that word) held in Palm Springs.

This was a panel session, hosted by Lisa Kianoff of L. Kianoff and Associates. Three partners (all Sage) participated. More significantly, I was not a participant (except as an attendee). This is a huge victory for the pricing with purpose movement.

Here is what each one had to offer.

Annette Balgord of Balgord Software Solutions

  • To develop her price she does begin with rate times hours, but then factors in likability of the customer and their people, the complexity of the work to be done, the potential risk to her firm in doing the work, whether or not the customer has an internal IT department or uses an outside contractor. Before setting price, she believes you must have a thorough understanding of what the customer needs.
  • “Even if you do rate time hours and you do not understand the needs, you are still guessing at price, aren’t you?”
  • For the most part, she believes RFPs are poorly written and inconsistent and refuses to get involved with prospects who will not let her bypass them.
  • “When a customer asks, ‘How long did this take?’ We say, ‘We don’t know, we do not keep track.’”
  • Annette kept timesheets for a year, only to realize she never looked at them and it caused ill will with her team. To manage projects she is using duration (due date) completion percentage rather than effort estimating.
  • “I don’t know if I make money on a project, but I do not care. I know I make more money overall. Oh, and by the way, I have no collection issues and no bad debt.”

Mike Taylor of L. Kianoff and Associates

  • Started fixed pricing on upgrade projects and found that customers love fixed fee engagements. They are paying a premium and they love it because they are only down three or four hours, rather than the one day or two days when they billed them by the hour.
  • Developing scope is always an issue, but it is much easier when they do paid Feasibility Evaluation engagements. Pre-sale of software engagement. They found that if they can prove that they have a viable solution, even the customer’s budget number is irrelevant!

William Vespe of BCS/Prosoft

  • They offer a 100 percent money back guarantee with 100 percent payment upfront and have never had a customer ask for their money back. They have however, insisted on giving a customer’s money back and not continuing to work with them. They also include a 15 percent premium on fixed fee engagements.
  • The reason they move to a fixed price is that they found they were only collecting the forecast hours anyway, so why not get the benefit if they were able to do the project more quickly.
  • Scope, scope, scope. Change order, change order, change order.
  • They still do some work on a time and materials basis but 70 percent is fixed fee.

Report on ITA Breakout Session – Preventing the Loss of Customers

This is the third in a series of postings about my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<—I love that word) held in Palm Springs.

The session was less about the loss of customers and more about having solid non-solicitation and non-compete agreements with both customers and employees.

This is the second time I have seen New York attorney, Joel Greenwald present. He is very good and his content is extremely relevant to all small businesses. Some of his thoughts were:

  • The law is slow, but it catching up from a technology perspective.
  • Sometimes customer lists are trade secrets, sometimes they are not. It depends on how your treat the lists.
  • Having a non-compete is more prevalent than ever. They should be tight, reasonable in geography and duration and only signed by key employees.
  • Non-solicitation agreements (employees and clients) are more enforceable. Again, he recommends only key employees sign them.
  • However, everyone in a firm should sign confidentiality agreements.
  • Contracts should have severability clauses that allow the judge to invalidate one section without throwing the entire agreement out.
  • Do not include these agreements in offer letters and do not make them part of your handbook.
  • Tell job candidates not to disclose trade secrets from their current or former employers and ask them to sign as to whether they have signed any agreements.
  • All these documents are meant as deterrents not as litigation tool.
  • All companies should have a computer usage policy that is signed off separately from the handbook. This is similar to any sexual harassment policy as well.
  • Monitoring and accessing email on company computers are two different things. Monitoring is OK in almost all circumstances; accessing is less clear.
  • “Never punish people via the withholding of wages. Ever… it is really a bad idea.”

Thoughts on ITA Breakout Session – Professional Service Firm KPIs

This is the second in a series of postings about my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<—I love that word) held in Palm Springs.

Presented by Jeanne Urich of SPI Research. The highlight of my ITA experience occurred during this session when Jeanne acknowledged that a conversation that the two of us had at the spring ITA meeting has influenced her thinking and that she now believes that fixed price agreements are better for customers and consultants. Now to convince her to give up on these dozens of benchmarks! I think this will be a much harder task.

The study consists of 175 metrics, 20 of them deemed key performance indicators. The problem in my mind is that all, save one of the 20 are inwardly focused on the firm, even those in the “Service execution” and “Client relationship” areas are firm-based.

The problem as I see it with most benchmarking is that it focuses us on all the wrong things: the past rather than the future; internal rather than the customer; efficiency rather than effectiveness.

For example, one “customer” metric was about project completion success. The question was asked of the providers, “What percentage of your projects are completed on time and on budget?” The average answer was 74 percent. This more than doubles the number (35 percent) according to a study done by The Standish Group who asked the same question of customers. Needless to say, I side with customers on this one. Again, to her credit Jeanne acknowledged this flaw.

Many of the other metrics are based on the false premise that value delivered is equal to rate times hours, aka, the labor theory of value. This theory is demonstrably false and belief in it has been proven to cause harm.

I have sat in on countless benchmarking session and the reactions of the attendees is always the same: a) if they are doing better than the benchmark, they think they are OK and do nothing, and b) if they are worse than the benchmark, they dispute the data and still do nothing. Path (b) actually happened twice during the session!

My beef with all benchmarking in business is that while it attempts to appear scientific, it is not even close. To her great credit Jeanne is very careful about saying that these metrics are correlative not causal. Unfortunately, most people do not understand this distinction and are lulled into the illusion of control via data.

The findings are always similar and in many cases are nothing more than a bunch of truisms:

  • Firms who market well have higher revenue. (Yet, marketing spend, even among top firms, is less than average across all industries.)
  • Firms who close more business (win to bid ratio) are more successful. (The question is, what do they do differently that allows them to have a higher win to bid ratio? Win more or bid less?)
  • Few firms grew revenue in 2009.
  • Clear vision and strategy and taking care of your people are important in professional firms. Firms that focus on culture are rated as better places to work. (What kind of culture?)

Conclusions are almost always the same – “Increase revenue, lower discretionary spending.” Always a good idea.

Is the Value in the Idea or the Implementation?

(or Do you believe in God?)

For the past few weeks I have been involved in a dialogue of sorts on the TEDtalks LinkedIn Group about whether the value of an idea is in the idea itself or rather in the implementation.

This led to a pithy, but profound exchange between myself and Wan Chi Lau. To spare you the details of the other parts of the conversation, I have excerpted just the relevant threads of the conversation. Thanks, Wan for the permission to reprint your comments.

Ed

Without an idea, you have nothing to implement.

Wan

Actually I would disagree…the evidence is all around us. The entire Universe is one big implementation without any "idea." We are of the Nike mantra…."Just Do It."

Ed

Only if you are an atheist. I am not.

Wan

Well, clearly I am 🙂

This brief exchange is the whole essence of the argument and I am curious to know if the following hypothesis is true: If you believe the value is in the idea, then you are likely to be theistic; if you believe the value is in the implementation of the idea, then you are likely to be atheistic.

Thoughts?

Thoughts on ITA General Session – Negotiation

Over the next few weeks I will be posting my thoughts from sessions that I attended at the Information Technology Alliance’s Fall Collaborative (<—I love that word) held in Palm Springs.

In the first session entitled Negotiating: The critical skill for success in a soft economy, Jack Kaine delivered an excellent presentation including some of the following good thoughts:

  • Bargaining is about who is right; negotiation is about what is right.
  • Win-win is about mutual gain, which is not to be confused with equal gain.
  • Bargaining presupposes a zero-sum game like poker; negotiation presupposes the ability to grow the pot beyond what is at the table.
  • The sooner you quote price the lower it will be and be proud of your pricing!
  • When you lower your price unilaterally you are saying you are a commodity.
  • Do not bargain with yourself! Discounting indicates a lack of self-esteem.
  • Saying something is "fair and reasonable" is a subtle way of calling the other party, "unfair and unreasonable."

Reason to kill time sheets #17

In reply to a conversation with a member of VeraSage I wrote a really good paragraph and I thought I would share since it is TLFT (too long for Twitter).

One of the issues (with tracking time) is vagueness which is the enemy of accountability. Getting people to define the results is hard work; time sheets allow managers to be precise about the effort expected while leaving the results entirely vague. Thus someone who bills many hours can be considered a hero or an idiot depending on what the manager thinks of them.

Singapore and Jamaica

In 1959, Singapore and Jamaica were economic and population equals. Over the next 40 years something incredible happened. Singapore has become an economic powerhouse while Jamaica has stagnated.

image

In the above Gapminder graph, the yellow dots plot Jamaica’s course while the red dots chart Singapore’s. What could possible explain this?

I believe the answer is in supply side economics. While both nation have similar needs from a population and climate standpoint, only Singapore has focused on creating supply for others. Jamaica’s belief has been, “We need, so it should be given to us,” while Singapore’s has been, “We have created and provided, and it has been given to us.”