The “Price First” Engineering Approach
In my “How to Manage Labour Costs” Essay, I discussed quite a number of novel concepts that were needed to substantiate the Cantillonian argument of how prices affect production costs.
One of those concepts, was “Price First” engineering.
What Are WE Building Anyway?
Engineers, being ‘builders’, like building.
But we NEED good reasons to build.
Saying that one is building a Parking Lot, for example, is not enough. While it might be “obvious” that, well, people need parking lots. It is NOT, however, altogether obvious that the “parking lot” is the root problem.
What if the “problem” could be solved by a car-sharing model? In which case more problems could be solved that way: less traffic +less time to commute to work + less tired when arriving at work + less air pollution + less noise pollution + less energy costs + less cars on ‘campus’ = NO NEED FOR A PARKING SPACE!
“Price-first” engineering, is ultimately about “value-first” engineering.
Value-First!
Determining the value of what an engineer is doing is the challenge that the “Price-First” approach is addressing.
The current ways to address the value question are the following:
- Use production costs as an input. Add margins to determine the final value.
- Look at the market prices! Try “beat” them, or limit supply of your demand and thereby FAKE the increased value.
- Target localised territories. Become the MAFIA! Kill anyone who sells the same product on your street!
- Create DEMAND via various “sales” tactics. There are enough books on this dear planet of ours to help you.
NONE of these above approaches actually work. I have tried them. They don’t work!
Oh, I do definitely KNOW people for which some or ALL of these approaches DO “work”.
SALES is NOT Engineering
If we “give up” on the usefulness of engineering and just focus on “sales-first”, we will ultimately give-up on the USEFULNESS of creating NEW things.
“Price-first” is more nuanced.
It allows for the engineer/business to DO both ‘sales’ and ‘engineering’.
SALES!!!
Sales is ultimately about PRICING.
One could make a BILLION sales. But still NOT make a SINGLE dollar! It squarely depends on HOW one “measures” ‘sales’. Is EVERY single time I write and ‘someone’ “views” a sale! BINGO!!! I have about 1701 sales! Based on the number of “sales” I have on my medium posts, I should be RICH by now!
Thing is, “sales” is about PRICING. One could “make sales” and money and still not create value!!!
PRICE.
Done correctly, pricing leads to “good” engineering + precise valuation + value CREATION.
Good Engineers!
They focus on what “value” they are creating.
They focus on the “price” of what they are creating.
They focus on the end-to-end EXPERIENCE of what they are building.
GOOD Engineering businesses
They focus on the problem they are solving.
They focus on the value they are creating. This involves BOTH “engineering” and “sales”.
They focus on the architecture as well as the “build” of their product.
