“Rev X” – What’s Wrong With This Picture?
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“Rev X” – What’s Wrong With This Picture?

“Rev X” – What’s Wrong With This Picture?

Rev X” – What’s Wrong With This Picture?

One of the most dangerous occurrences in any relationship, including a B2B outsourcing services contract, is when the parties have fundamental differences in the way they see the same situation. Given adequate understanding, discernment and communication, that doesn’t have to happen.  But in the world of business, it too often does.

Let’s sketch this out as we go deeper into the service lifecycle.  In the diagram that follows, first sketched on the back of a napkin in 1998, the X-axis represents “Time” while the Y-axis is High and Low.

Consider first the “Problem” line.  Early in the contracting lifecycle, the client’s level of problems will usually be quite high.  (Wouldn’t it generally stand to reason that this is why they hired the contractor in the first place?)  And, because the service provider has acquired expertise in their field, given time, these problems are reduced.

(Note: Remember that the client defines these problems.  If the contractor has started the contract well, the client has defined the problems, prioritized them and provided clear metrics as to what the expected solutions look like and over what time period they will be accomplished.  This is the essence of the Transition Meeting® {see blogpost dated July 1, 2013, http://clientretention.com/the-blog/page/2/}).

The second line on the graph is labeled “Fees / Profits”.  Depending on the type of contract reached, a service provider may be at risk (often termed a P&L or a lease arrangement) or they may earn a “Fee for Service” with all or some costs reimbursed.  Many of these contracts include performance incentives or penalties.  Regardless, it is almost always true that the contractor’s income and margins will improve over time as the contract progresses. Often the provider finds ways to operate more efficiently and typically there are start-up costs and selling expenses that occur early in the cycle.

So here’s how this looks:


Now, the lines may slope differently in your industry or the timing may vary, but the key question remains, what is wrong with this picture?  Does it look different depending on which point of view you take (the service provider or the client)?  Does this, i.e. Revelation X®, really happen?  Is it a problem, and if so, what do we do about it?  Is there anything that can happen that could make this even worse?  Have we created a conundrum (and, is it possible that conundrum could be the 3rd greatest word in the English language)?

Until next week.

John & Steve