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I think another take-away from the story is that the domain you work in will dictate the solution you come up with.

If you are a high-level exec, the domain you have, the levers and pulleys available to you, are asking your direct reports to investigate the issue and come up with a report on the problem and generate potential solutions, which will then be discussed and evaluated in meetings–at a very high level. To somebody on the ground level, the domain of the problem is "what do I have around me to save time? oh, I have a fan, let me use that. Done."

I think your point about incentivizing workers is part of it. This story reminds me of the This American Life piece about the NUMMI plant where Toyota worked with GM to teach them the Toyota way of assembling cars. [1] Part of the Toyota Way is to empower the individuals at the ground level to own the process and to improve it. The interviews are surprisingly emotional for something that's "just work", but I think it shows how empowering people to own and improve their everyday gives them agency.

[1] https://www.thisamericanlife.org/561/nummi-2015

I think it actually matters that it's an urban legend. If it were a true story the value of its message would be less disputable. But if it's an urban legend that means that the message -- that line workers have valuable and inexpensive insights to offer -- is unsubstantiated and may not be true in the main. (I qualify this with "in the main" because of course there must have been some occasion when a line worker had a big brain idea that saved the company a bunch. The question is how often it happens and whether it's cost effective to detect and implement these cases.)

Parables are dangerous, because they sound good and appeal to common sense, but it turns out that in real life common sense is often not correct. Common sense works best when applied to situations encountered in the ancestral environment and does not necessarily convert over well to systems engineering.

Does it really make a big difference if it’s true or not? Even in the case where it’s 100% certifiably true, it’s just one anecdote. As you point out, you need more data on a trend to take it more meaningful.

That all being said, I think this sort of tale can still be a useful tool to have a discussion around. And then that discussion can in turn produce questions that could later be backed up by research and data.

You might want look in Kaizen, which one of the key basis is that the workers closest to the problem are empowered to stop production when issues arise and have input when approaching problems on the line.

>in real life common sense is often not correct

I can easily imagine a real-life scenario where some quick and dirty fix works, say, 75% of the time. (And maybe that's good enough.) But the expensive process change works 99%+ of the time and, even though there are cheap ad hoc alternatives that work in a particular scenario, you're still better off actually fixing the problem properly.

I used to work as a SW developer for an assembly line. Anecdotally, "my" "line workers" were very good at micro optimizations s.a where to place tools, when to duplicate stands, what order of operations makes more sense, alert when a material/part quantity drops.

I was occasionally replacing one of them to QA a SW tool, and was pretty slow and clumsy comparing to them.

I'd say overall their resourcefulness or "practical engineering" did some 1-5% impact on throughput.

> line workers have valuable and inexpensive insights to offer

I saw it more as just a lesson about not overthinking things. Another version of the "During the space age Americans spent money developed a special compressed ink pen that could write in space, the Russians used a pencil". I think looking for a simple solution first is always good advice.

That story seems more or less to be a myth, too. And there seems to be a good reason why they used from pencils, which they used in the beginning to pens:

"Pencils may not have been the best choice anyway. The tips flaked and broke off, drifting in microgravity where they could potentially harm an astronaut or equipment. And pencils are flammable--a quality NASA wanted to avoid in onboard objects after the Apollo 1 fire."

https://www.scientificamerican.com/article/fact-or-fiction-n...

Interesting, I had meant to point out that I had no evidence one way or the other if it was actually true, the point is just the idea of keeping it simple.

And your counterpoint about the graphite floating around is a good parable for why seemingly obvious, "clever" solutions often don't actually work, and that armchair critics should not assume the solution team was not smart enough to consider the obvious ideas :)

Never considered the compressed ink pens that could write in space were an example of Chesterton's Fence. Damn. The fence strikes again.

A.K.A. "What an ordinary engineer can do for a dollar, a good engineer can do for ten cents."

I heard that's another myth. The pen was developed privately, NASA and the Russians just bought them at extremely reasonable prices, and they worked better and safer than pencils.

But sometimes...

My anecdote: a close friend's brother was working as a laborer on a pipeline dig. One day work halted for a couple of hours, during which the construction supervisor and engineer were huddled over some plans.

My friend's brother saunters past, looks over, and says "there's your problem," placing a finger on the plan. Then he walks on.

He had seen a triangle with angles not adding up to 180 degrees. He was right - that's where the problem was.

> He had seen a triangle with angles not adding up to 180 degrees

Genuinely curious. How does one even draw a triangle whose angles don't add up to 180 degrees?

My guess is that the triangle was drawn correctly, but its interior angles had labels like “55°”, and those labels didn't add up to 180°. So the triangle could be constructed differently from intended, depending on which two of the angles the constructors used for reference.

The morale of this story is that as a proper consultant, you should be the one to charge that customer $8mio for the $20 fan, because that's what value based pricing is all about.

> The best solution (and I believe a bunch of research backs this up) is to better incentivize your line workers and reward them appropriately. I know one study in particular that showed broad-based stock option ownership among employees was correlated with stronger company results, while options concentrated just among senior execs was not correlated with business success.

It can be also quite easy to make mistakes with these incentivisation schemes, fe in finance I've understood they can quite commonly cause problems.

Pretty much any incentive scheme can cause problems if it’s poorly thought through. You also need people paying close attention to any abuses.

I knew of one company where the Sales team were compensated based on the value of orders booked by a given date at/near the end of each month. That monthly value was unaffected by any orders cancelled from the previous month. What happened, of course, was that they would persuade people to place orders to be cancelled once the date passed. The value of the orders was always decent on the date in question, so the Sales staff always did quite well but the same orders might be placed, cancelled, and placed again multiple times over the year before they properly materialised (if ever).

There's another element where the consultant simply enumerates all of the things that the employees have already been telling management for years. And of course there's an entire spectrum in between.

Some things are only important once a dollar figure is attached to them.

This blog post touches on the topic (highly recommended read):

https://blog.erratasec.com/2020/07/how-ceos-think.html

> Outside consultants often end up saying the same thing you do, but are trusted whereas you are not. CEOs listen to the outsiders because they have no hidden political agenda.

The one time in my career that I worked with management consultants, I wasn't all that impressed. The partner and one of the associates were sharp enough. The other associate was not.

That said, they created a big fancy spreadsheet that kept the business planning people happy and basically validated what we had been telling senior management.

I'm not sure that's bad though. Having been, at a later time, an IT industry analyst myself, there's certainly some value to someone coming in with a fresh set of eyes, without the biases and mindset of people within the company, and (as you say) without the motivations to push a project that may not make sense.

2/3 of staff being competent is a great batting average for a business.

3rd party validation of a biased party's proposal is a valuable product.

Less good is when the "validation" is just for show, like hiring Ivy League grad consulting just because of the aura of the name.

I think this case was a little bit of both. Senior management had made up their mind to spend money with McKinsey and we (I was the product manager) rolled our eyes a bit. But they got some fancy spreadsheets out of it and, in all fairness, they did get a trusted outside partner who basically said that our pricing etc. strategy was reasonable.

That's one of the reasons that as an engineer I find Design Thinking and (especially) Human-centred Design so valuable—if done well it forces to you look at the problem from the perspective of human motivations, incentives and there's so much low hanging fruit there.

The story of the Good Kitchen comes to my mind: https://www.coursera.org/lecture/uva-darden-design-thinking-...

Digression: another valuable aspects of DT/HCD include: working as a natural extension to Agile/XP, deriving solutions to problems in a data-driven way, ability to find low-hanging fruit more easily due to the application of divergent and convergent modes of thinking, being cheaper in the long term, and finally—giving designers and engineers tools to shut down any pet/vanity projects coming from senior management, by cheaply proving them to be wasteful.

Where can i find that study about stock options?

“value-based pricing”

As I understand it, the value is based on the customer’s perception of value. And I believe this is contrasted with hourly-based pricing.

If I try to come up with an example, I might say the postal service has a value price. Mail a letter anywhere in the (continental) US, 0.55 You don’t pay 1.55 if it gets there sooner. Even if you overnight the letter, there is a flat fee. The extra cost for more difficult deliveries versus easier deliveries is a wash; the post office doesn’t charge you more or less.

Hourly consulting, like for a winning advertising campaign—what is that worth?

I don’t understand the remark suggesting value pricing is the more lucrative of pricing structures.

Value-based pricing is used to imply that the price of the service should be proportional to the value the customer receives from it, not the cost it took for the consultant to implement the solution.

Of course, with huge corporations, teeny improvements can be worth millions in value. So consultants working with these large corporations will usually prefer a "value-based pricing" model because if they can convince a customer that they can reap $100 million in additional savings or revenue (not unreasonable for a large company), they could easily charge, say, $40 million for it, but they would never be able to charge, say, $5000 an hour if that's what the timing worked out to be.

I take your point, "because...they can convince a customer they can reap $100 million in additional savings or revenue", this 'potential' revenue extends to the 'value' of the service, and the consulting agency should be allowed to take a proportionally larger share of this potential revenue as fee regardless if they are successful.

I'm coming at this from small businesses, who don't usually have resources (MBAs?) to forecast revenue in the way you're suggesting.

Again, my thought of value-based has a customer with a fixed opinion of the 'value'. You can't really get them to spend more money, because they don't perceive more benefit proportional to increasing cost.

I'm asking, is my application of value-based consistent with the term as you use it? And if yes, on what _other concepts_ does the theory turn to distinguish your concept of fees proportional to the customer's potential revenue?

What flips the interpretation of 'value-pricing' from a 'commodity' service, to your 'gambling' argument? If it's the uncertainty burden, then wow, that is some forecasting and salesmanship!

Mail is 55c because it's a simple amortized cost of a unique government service with some margin. The value varies widely.

Value pricing is when different customers pay different prices for substantially the same service, like first class vs economy airline tickets, and app store fees.