Let’s say you work in software development. Because chances are that you do if you read this post. (If you don’t, please read on, by all means)
You’re given an assignment to integrate two business systems, moving data from one to the other. It’s one of the most common tasks in our industry.
All good! After a few days work you install the solution on a server and expect to be rewarded with gold and diamonds. And the customer is happy to oblige, since your solution will free up two full time resources that can do better things with their time. The question is: how much gold is that, exactly?
DeLorean economics 101
Let’s say you fire up your trusty time machine, you pack a few modern telephone switches, travel to the mid 1950:s and step into a the HQ of a large phone operator. There, you announce that “with this device, I can replace all your switchboard operators forever”. Furthermore, you see it fit to advertise that all you want in return is the salary of only half of all the switchboard operators that they can dispense because of your magnificent device.
Even if the salary for a female switchboard operator (and they were all female) were only a quarter to half of a man’s, that should add up to a pretty penny. And the phone company would happily cover you in the gold you demanded.
Apart from the time machine, this is not an unlikely story, since our economy is based on a model that says your reward is based on the added value you can supply, or the money you can save. If you can replace 10 000 switchboard operators, you can be rewarded as much as the salary of 9 999 of these, because your customer will still be making a profit. But you’re not greedy, so you’ll settle for half.
At face value
Now, travel back to the present time.
Step into the HQ of a phone operator of roughly the same size as its 1950 counterpart and declare that you have a machine that can replace all their switchboard operators, and all you want in return is a million or so dollars. And while the nice man from the security department is assisting you on your way out you wonder where things went wrong.
What went wrong is of course that you no longer provide any value to the company. They do not have any switchboard operators, and consequently they have no use for your machine. No value, no gold.
It will seem obvious when laid out like that, but you’d be surprised how anachronistic some industries can be. There are developers that demand outrageous amounts of money for a solution that could replace a dozen secretaries that manually move data from one spreadsheet to another. No company in its right mind would employ a dozen secretaries to do that in this day and age. (I’m not saying there are no such companies, I’m saying there shouldn’t be)
The ghost of switchboard operators past
So, before you demand a million dollars for a product that can replace between one and ten million switchboard operators, make sure you know whether there are any switchboard operators to replace in the first place.
Or else you are selling a ghost product, one that can only provide ghost value to your customer, since they can only free up ghost resources.
You can absolutely do that, but be prepared to be payed in ghost dollars, and they are only good for ghost beer.
(Feature photo: etherknot)