When I was working for a Value-Added Reseller (VAR) a long time ago, there was a rule of thumb that sales used whenever they were selling equipment – the service charge should not exceed 10% of the cost of hardware and software supplied. At the time it never struck me as odd, but much later on, at another VAR, I heard that same statement, and I wondered, “How did they come up with that formula?”
To me, there was no reason that the services could not cost more that the hardware or software being implemented. The provision of service itself is a valuable thing, just ask anyone who has been given bad service at any establishment.
I didn’t realise it then, but that moment initiated a change in my thinking about how I approach service jobs or more particularly, knowledge work.
There is an old joke I know.
There was once a widget factory that depended on a core piece of machinery for the production of its widgets. This piece of machinery was running for about fifteen years. One day when the turn it on, all it did was give a grinding, whirring sound and refused to work. Without this machine, the factory couldn’t produce its widgets and was losing tens of thousands of dollars for every hour that the machine was down.
The current engineers tried as they could over a day to figure out the problem and get the machine operational once more, but they couldn’t figure it out. It took another day and a half, but eventually they contacted an engineering consultant who had knowledge and experience working with such a machine. They asked him to come and see if he could fix the machine.
The engineering consultant came and turned on the machine. He spent five minutes and listened to the grinding, whirring sound, and took a quick look inside of the machine. He then went to his truck and came back with a 10 inch long bolt. He reached into the machine and took out an old, rusty, worn version of that bolt and put in the new one. He then turned on the machine, and voila, it was back in action. It took thirty minutes in total for him to get the machine working again.
Everyone cheered and thanked the consultant. He then handed them an invoice for $10,000.
The managers baulked at the price. “But all you did was spend thirty minutes replacing a $10 bolt! How could the charge be $10,000?”
“Oh, the bolt is free!” the consultant replied. “Knowing where to put it costs $10,000!”
I often tell this joke to illustrate to people how valuable knowledge work is. People often put value in tangible items, but little value to thoughts, ideas and ability.
We are able to quantify the costs associated with an employee, but are unable to quantify how much value in return an employee returns to a business.
It’s time we change that.
In the information age, value is no longer tallied in terms of how many items you can produce, or even how many hours you put it, but only by how much return that you can bring.
That’s why I’ve created a business that’s about producing value for other businesses. And I do this, not by selling hardware or software, but by using the knowledge, skills and experiences that I’ve gained during the years to help businesses run better using information technology.
It’s different from what other consultants in the region have provided, but knowledge work should be valued. My current customers believe that, and so should you.