How to Successfully Think Outside the Box
Two decades ago, I worked for a small company that repaired computers and peripherals for US military bases across Europe. I became the manager of European operations a little more than two years into my tenure there.
The company I worked for was adamant that we charge our customers the contractually agreed upon hourly rate from the moment a technician left the depot until the technician returned to the depot. With some of the trips a few hours away, and with repeat trips needed for complex repairs, our invoices to these customers were getting expensive. They started to complain. They found other solutions. Our work dwindled month after month.
I pointed out that most of our costs were fixed. Our technicians were salaried. The cars were leased. Fuel was the only real variable for each transaction. I proposed offering a fixed price for each repair, but leadership balked at the idea. My effort to think outside the box initially failed.
One day we won a contract for a large company that provided a critical communications service to the US Army.?Due to the demanding level of the service agreement, and the fact that technicians could be dispatched at any time on any day or night, my company was able to charge a premium hourly rate.
But there were two problems.
For us, the problem was few calls because the equipment – due to its importance to the US Army – was high quality with redundancy built in. The stuff rarely broke.
For our customer, the problem was not the cost of repairs, but rather the unpredictability of the cost from month to month. They had trouble forecasting a budget for this service.
With a few months' worth of data, I averaged how many service calls would be needed in a normal month – a fixed number (I believe it was two) – and I estimated an average number of hours per call to come up with what our price to the customer would be each month in this most likely scenario. The customer was agreeable and, in fact, eager to be invoiced this fixed amount each month, while we would be guaranteed this revenue each month. Even if we had to dispatch a technician more than two trips in any given month, our additional cost would only be extra fuel for the vehicles.
By coincidence, the monthly amount covered the rent on our European depot, which is how I pitched the idea to my boss. He convinced upper management that this new cost model was beneficial all around:?a happy customer and guaranteed revenue that paid for one of our largest fixed costs outside of labor.
In this case, I quantified the box and proved how thinking outside improved our lot. Once this barrier was broken, my company listened to me and other managers – who truly knew their programs and customers – whenever we proposed a new way to do something.