The Truck, The Tree and Prevention – by Gabe Smith
At Price f(x), we get to talk to industry-leading companies every day about their pricing and quoting processes and opportunities to improve them. There are two recurring themes in these discussions that I wanted to address in this 3-part post, which I will call “The Truck”, “The Tree” and “Prevention”.
First, the Truck. We were recently kicking off a POC at a distribution customer and walking through an in-depth review of their current process for setting prices and communicating them to customers. The process was quite sophisticated, but built using Excel and Access, which caused challenges in terms of scale, speed, and the level of segmentation and analysis they can employ. There is one Pricing Manager at the organization that built most of this process, and we got the sense that he was the only one who really understood the entire model in both theory and practice. It led me to say to the Pricing VP during a break, “Wow, you have quite a Truck Factor with this particular person.” Meaning if he was crossing the street and got hit by a truck they would be in trouble. His reply was classic, “Yeah, I have truck anxiety. I don’t want him crossing streets!”
In the project we just identified a bug in their calculations that has resulted in a significant gain in profitability. There have been studies done that show as much as 3.2 bugs per line of code / formulas in Excel/VBA.
When I was at Cisco Systems, there was a famous Software Engineer that developed the software used to do the auto-testing on most of the manufacturing lines at Cisco and our contract manufacturers. It had a 99.9+% uptime which was needed because if it went down, manufacturing would literally stop. He had retired to Hawaii but had a special arrangement which included a T1 line, travel restrictions, and lots of money of course.
It amazes me how many multibillion-dollar companies in the world have processes built like this that only one person understands. If that person leaves for another position, wins the lottery, or is otherwise suddenly gone, the business could literally stop.
Do you have a “truck factor” employee on your team? How can you mitigate this risk? My next post will focus on “The Tree”. The one after on prevention for both the Truck and the Tree scenarios…
Source: Gabriel Smith, VP Solution Strategy and Innovation at Price f(x)