Have we lost the value of knowledge?
I recently went to a Clever Happenings talk. These are fascinating talks organized by Dr Jason Fox and sponsored by The Centre for Workplace Leadership, with different speakers every month. Jason is fascinating character and if you get the chance to go to his talks please do. The presenter on this occasion was talking about brand and sales. At one point he asked the audience “What is it that a GP Doctor sells?” People shouted out hope, drugs and health to name a few. After canvassing the audience he thanked them and then disagreed with all of the suggestions made and said, “No, what a doctor actually sells is time!” Now I understand this point of view and agree that in today’s business world this is true. However, I personally believe that in a lot of careers, we sell more than time, we sell knowledge. The problem is, the world seems to have forgotten how to value it, at least in my world of construction consultants or maybe people just don’t want to pay for it. Some research shows it’s an age old problem. If you look at Wikipedia it states ‘The idea that knowledge has value is ancient, in the first century AD, Juvenal (55-130) stated “All wish to know but none wish to pay the price”’. Have we really not moved on from this thought?
When I was just a mere lad starting out in the building industry I was told the following story.
A bloke woke up one morning, went into his airing cupboard and noticed a massive dent in his copper hot water storage tank. Worried it would crack, he called a plumber. The plumber came out and had a look at the tank, looked at the dent and rubbed his chin. He went back out to his van, got a rubber headed mallet and came back to the tank. He went to the opposite side of the tank from the dent and with one big swing of the rubber headed hammer, he hit the tank. As if by magic the dent just popped out perfectly. Job done. The customer was over moon and asked the plumber how much he owed him. “£350” the plumber said. In shock the customer said “$350? You’ve been here 5 minutes. How the heck can you justify charging me £350?” The plumber calmly looked at the customer and said “£100 was for the call out and my time. £250 was for the knowledge of knowing where to hit the tank!” The customer paid.
That story has always stuck with me. I believe we have lost the art of defining the value of our knowledge or maybe ‘wisdom’ in this case and we just get hung up on the value of time. Now don’t get me wrong, time is the most precious thing we have, we can never get it back, but we should never underestimate the value of our knowledge. So why have we got so hung up on time as the only value we have to offer, especially in the consulting world?
I think a lot is down the fact of how consultants are procured and also the competitive nature in which consultants now compete. I have been in so many interview situations with clients where I’m asked, “What do you bring to this project?’ to which I reply, “A great team, great experience and a long relationship of working with you and delivering projects on time and on budget”. To which I hear, “That’s all great Mark but your fee is too high right now so if you can reduce that then the rest of your value will be come back on the table!” It has become very tough to sell true value, especially in Australia and even more so in Melbourne.
As another example of how we don’t value our knowledge to our clients. I once worked for a large engineering firm. They worked on projects in the billions. Now they were working on a mine and a solution to keep stock piles of material protected was put forward by another engineering firm. Their solution called for a warehouse to be built of gargantuan proportions. I don’t remember the exact numbers but the cost of the warehouse was enormous, around $800 million. The engineering firm I worked for was called in to come up with an alternative solution that was cheaper. Now rather than being smart and take on this challenge to bring an innovative solution with an innovative fee structure, the engineer just worked out how much time they thought it would take a number of their clever chaps to design a new solution. That fee was around $100k. Now the engineers came up with a genius design of a wind break wall that was shaped so that minimal wind vortexes would be produced so that the material would not blow away. The new wall was half the price of the warehouse, saving the client $400m! Now if the engineer had used their intellect they could have said to the client, “We’ll charge you $100k for the time we spend on solving the issue, but we want 1% of the savings you make for adopting our solution.” If the engineer secured that agreement on this project they would have earnt $4.1 million in fees. Now just writing this makes me uncomfortable and I’m thinking, that’s just too
big a fee for this project! But is it really? It’s just 1% of the saving the client made. 1%! That’s nothing compared to what the project would have cost them.
Now I know results and outcomes are not always that clear cut to define but we have developed procurement routes of how clients and contractors can share savings, on say GMP projects, for smarter ways of working so why can’t the consultant world start thinking this way and suggesting better ways to bring value for Clients and get rewarded to bring the value of their knowledge not just the value of their time.
A few years, ago one of my very bright team members, Hugh McGaw wrote a paper on how the building industry should learn from the insurance industry in the way it procures fees and returns against risk. The insurance industry do this very well and set levels of reward based on complex algorithms determined by the level of risk involved. The time element just doesn’t come into the value factor. It’s time we started look at alternatives to the old time based way of calculating fees and identified the true value of the knowledge we bring to our clients and projects.
Are we ready to step up to the challenge? I’d be fascinated to hear your opinions and ideas on the on the subject.