REDEFINING VALUE IN AMERICAN CAPITALISM

Why shouldn’t doctors, lawyers, mechanics and… technologists get paid for the value they create?


This man is creating value…

Example 1

You pull into the the service garage. You bought a Volkswagen Auto Group (VAG) product (Porsche, Audi, VW), so you expect all news to be bad news. There’s a noise; a known time bomb. You’ve long wondered if you would be one of the failures. You now wonder what other secondary components might be damaged if the first component is as bad as you think.

You wonder if you’re hosed.

You wonder if the car is worth fixing.

And here’s where your mechanic story goes bad…

When your car fails, you’re in danger of paying the highest price for the worst outcome.

Example 2

That knee is bugging you, again. Five years on, you’ve still never felt right since surgery. Is it a new condition? An old one? Something compounded from never healing in the first place?

Your doctor wants to give you an injection. He gives it to you right there in the office. Three days later, you know it didn’t work. Made things worse. It was $1,800, after insurance. You go back in six weeks; your normal guy is out. Another doctor in the practice sees you. He says, and I quote, “This is where he injected? Oh, well, he didn’t do it right. You’re supposed to do this procedure with an ultrasound, so you can see that the injection reaches the nerve.”

You get that injection. It’s another $1,200 — luckily, you hit your deductible.

Four weeks later, you have some relief. But that first six weeks you waited — when the doctor missed his mark — you were in extreme pain, stopped all your exercise, and couldn’t even go on hikes or walks with your family.

And here’s where your medical story goes bad…

Those bills hurt. You did not need the extra expense. And you paid the highest price for the worst outcome.

Example 3

You hire a lawyer, a programmer, or a dog trainer. You hire an accountant, an architect, or a marketing consultant.

And here’s where your service provider story goes bad…

When hiring most service professionals, there’s no recourse for you, the buyer, when you pay for time instead of paying for value creation.

WE’RE SO USED TO PAYING FOR TIME

And it’s wrong.

This is a cool clock… but you should’t pay for it

Your doctor bills based on the number of visits. More visits & procedures = more money for her.

If you’re ever unlucky enough to need a lawyer, you definitely don’t pay them for results. Case drags on? Only one of you cares.

If you make a deposit with the tattoo artist, ask for a “bear playing soccer,” and he instead draws “Winnie the Pooh eating honey at mid-field”, you’re out the deposit.

BUT THERE’S AN UPSIDE

Go back to that mechanic. Say you get a choice:

“Hey, man. I just turn a wrench. It’s $2,500 to replace your water pump, but if I fixt that, start it up, and then find something else wrong, it’s gonna be more.”

vs.

“From my experience, you might be okay. I’m suggesting you fix it. Spend $3,500 with me, and if those secondary components fail within a thousand miles, I’ll buy the car from you.”

CAN WE OFFER THIS PAY FOR PERFORMANCE MODEL AS TECHNOLOGISTS?

Yes. But our clients won’t let us.

Here’s what I mean.

When it comes to paying for value > time spent, there has to be an upside. As in:

“It’s six months and a million dollars. If we do it in four, it’s $1.25M. If we do it in eight, $750K.”

When Skookum has pitched some version of this to enterprise and mid-market companies, most procurement departments have an aneurism.

Executives love pay-for-value. Procurement people, though, only have a construct for buying servers and toilet paper.


BUT SAY YOU’RE AN IP LAWYER…

Your client wants that case DOWN. Get it kicked in three months? Bonus payment. Go all the way to trial (years)… and lose a case you agreed to defend… because you believed law was on your side? Zilch.

…OR A GOVERNMENT CONTRACTOR

In a mission critical project, close doesn’t count. Your mistakes should not equal more money.

…OR A TAXPAYER

Do you care about time spent on project, or results?

time is only money… when value is created

In our culture, how can we change our perception of value?

In your business, how can you change your purchasing to value outcomes over hours? In your service, how can you sell your value instead of hours?

How can you be brave enough to offer a guarantee? That your SEO will work… or else? That sales will increase… or else? That your patient will heal… or else?

GETTING STARTED

First, you have to define the best and worse case scenarios. Value is either pass/fail. Later on, your KPIs and agreed-upon outcomes are not for debate. If the best case happens, there’s a reward. If the worst case happens, the customer walks.

One boxer passed. The other failed. This is a legit method to look at the value your business created… or didn’t.

As for hiring a 3rd-party to create value, a guarantee from them — that the time they spend will equal value — is a major advantage to hiring someone in-house for the same task.

On the flip side, hooking up your partner with a gain-share arrangement can be a major driver to people busting their ass. After all, the longer it takes, the less value is created for you, and the less they should get paid.

IN CONCLUSION

Let’s look at value creation in every industry.

We all need positive outcomes, not time on projects. We all need results, not simply work performed.

In short:

Time is only money… when both are productive.

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