Cost Models That Change Over Time Need Performance Reboot

Consider a Major Corporate in a Niche Technology Development Sector

Initially leading the market, with the best return on investment, this company faces numerous challenges:

Funding and Market Entry: Once funding is secured, it seems like smooth sailing with eager customers adopting the essential technology.

Talent Acquisition: The company hires top developers with attractive compensation packages, aiming for sustainable, long-term success.

Pricing Model Challenges: At the start, the product’s sale price is based on the cost of generating intellectual property (IP), employing a cost-plus pricing model with royalties.

Over time, as external parties license and develop the IP further, they become competitors, driving down market prices and eroding the company’s market dominance.

The company must then shift from cost-plus pricing to a royalty model, effectively reducing profit margins as sale prices adjust to competitive pressures.

Resource Cost Management:

With thinner margins, the focus sharpens on resource costs, particularly employee costs, given IP is the business’s core.

There’s an internal challenge of optimizing costs for upgrades while managing customers still on the old pricing model.

Team Performance and Market Competition:

In a highly competitive sector, team selection, engagement, performance, loyalty, and timely product upgrades critically influence profitability.

Maintaining market leadership and investor satisfaction becomes challenging when competitors have lower development costs.

Meeting the Performance Challenges

Assess Current Performance: How much of the team’s 100% potential is currently being utilized? What’s the gap between current and possible performance?

Leverage Past Successes: What has enabled the team to reach its current state, and how can this be used to elevate performance?

Unique Selling Propositions (USPs):

What unique capabilities does this team offer that competitors can’t match?

How much of the operation contributes to these USPs, and how can this be maximized?

Operational Efficiency:

Which roles or processes can be eliminated to streamline operations?

What narratives within the team help or hinder performance, and which need to change?

80/20 Rule Application: How does this principle apply to team activities, time allocation, and cost-effectiveness?

Team Dynamics:

Where are the significant wins and losses within the team?

How are successes communicated, and how are underperforming areas handled?

Communication and Focus:

Can communication be significantly improved?

Is the team’s focus aligned with its goals, and how well is it working?

Answering these questions often reveals more than surface-level responses. An experienced executive coach can interpret not just what is said but what is omitted, providing insights into team culture and focus. True understanding comes when solutions previously unseen become clear, and the team moves forward with enthusiasm to implement them.