To know the price of all things, but the value of none

I keep getting annoyed by how corporations are so compartementalized that income and cost are handled by totally different departments. What is the effect? The effect is that the cost departments focus solely on cost at the expense of income.

What is a cynic? A man who knows the price of everything and the value of nothing.

Oscar Wilde – author of the quote “What is a cynic? A man who knows the price of everything and the value of nothing.”

“Who pays the price then?” You know that already, don’t you? We use the value to pay the price. In a cost-centric procurement model, the value is assumed to be zero and then the cost has to be covered elsewhere, e.g. by you when you are mandated but not renumerated for travelling outside of working hours.

But we do know, that many many corporations are moving away from the cost-centric $\min(\mathit{cost})$ view to a view where they look at $\max(\mathit{profit}) = \max(\frac{\mathit{value}-\mathit{cost}}{\mathit{cost}})$? At one client, they managed to increase internal appraisal of IT department services from 3/5 to 4/5 in a single year by this simple shift of mindset.

Did costs increase? No, they actually decreased! I know this is just one example, but it shows that focus on cost is not only a good way to get bad ratings but also a way to save less than you could have. Have a look here for instance for insight into what might be a kind of inverted U-curve for cost vs value. That is, if you spend to much, you could get better value by cutting costs, but if you spend to little further cuts will send you far down the slope.

Image sources

• A Wilde time: Wikimedia Commons | PD