Will Uber Kill Time-Based Billing?

Why would Uber’s business model impact the standard billing method of established professional firms?

An interesting observation was made on a radio program I was listening to last night.  Apparently a number of taxi operators in larger cities in the US are now doing all their pricing up-front for the passenger before they start the trip.  This means that the old  method of turning on the meter and charging what the end result was is becoming redundant as the taxi operators have worked out that the customer wants pricing certainty.  If the cabdriver doesn’t provide it, the customer will go to Uber…

The disruption Uber has caused within the taxi industry globally has been well documented, however, it did get me thinking.

With increased penetration of up-front pricing for work that used to be based on an set (arbitrary?) rate by time, customers from all segments of the economy are going to start to question the logic of entering a transaction with no known end price.  Where very other industry is going down the path of providing pricing certainty on commencement of a piece of work, why do the professions still believe they are immune from the impacts of the change?

In many respects, the taxi industry is similar to the professions – time by rate and it doesn’t matter to the provider how many hours (or miles) are spent on a job as they will know they are getting paid “for what they do”.  The sad thing is this has been ripe for exploitation (who hasn’t been in a taxi which “took the long way” to get somewhere?)  Unfortunately, it doesn’t create a great experience for the user of the services as they just have to grimace and wear it.

Disruption in pricing and business models is going to increase and roll through many other industries and professions that used to work on the time by rate model.  Customers are experiencing more of it and are going to demand more of it.

Those firms that start on the path to pricing on purpose will see themselves gain a competitive advantage – those that don’t will wonder what the hell happened.

Have a look around the Verasage site – there’s lots of rich material in here (esp recommend a solid listen to Ron and Ed on their “The Soul of Enterprise” podcasts).

The professions are going to become “Ubered”.  I hope they are ready for it.

Could not say it better myself!

Only just received the 2015 copy of the “Good, Bad Ugly” report on the Australian Accounting profession prepared by Business Fitness.  Makes for interesting reading.

head in the sand

There are a couple of points that are worth repeating:

  • revenue per partner has decreased by 8.9%;
  • average client fees have reduced by over 18% in the past two years;
  • for firms using timesheets, productivity is falling;
  • lower marketing spend over the past three years; and
  • 6% increase in firms using outsourcing (reasonable number, but not very many firms are doing it).

There is one very telling comment made in the introduction to the statistics in the report (my highlights):

When analysing the 14 years’ worth
of data relating to high-performing
firms, we can conclusively say that
productivity based on chargeable
hours has no correlation to
profitability.

Having just returned from the Verasage get-together in Boston, it has become even more apparent that the old models of firm management are not only redundant, they are dangerous.  Much of the discussion at the symposium related to the way successful firms focus on relationships – both internal and external.  This has to do with building, maintaining and honoring decent relationships.  Not relationships where everything is about flogging the crap out of your people and billing the hell out of your clients.  Relationships which are based on trust, accountability and common goals.

Having seen the damage done by the Almighty Billable Hour and looking at the impact this approach has on the cultures of firms, it amazes me that so many firms still use this model.

There is change already here in our industry and, as the GBU report reveals, this change is having an all-pervasive impact on our profession.  Either adapt or die.

Episode #34 Preview – Interview with Joe Pine

61938890c4e8e8b568f2a99e51ce0a54_400x400One of our all-time favorite business books is The Experience Economy: Work Is Theater & Every Business a Stage, by B. Joseph Pine and James H. Gilmore, which was published in 1999. Dan Morris and Ron Baker developed a CPE course based upon this content, applying it to professional knowledge firms. The book has recently been updated, and we are honored to be able to have B. Joseph Pine on the show to discuss this work, along with his other books: The Laws of Managing and Infinite Possibility. Folks, you don’t want to miss this show. Pine’s work will cause you to rethink how you create and deliver value to your customers, and what they are really buying.

Customer Service and Moments of Truth

Moments of Truth

            Each customer interaction is a “moment of truth”. And the savings bank of previous good works can be depleted with one poor interaction. One disappointment is all it takes. One gatekeeper that could have used judgment applied to a specific situation. One opportunity to understand that the happy customer tells few and the frustrated customer tells many.

If it isn’t clear by now, I was on the receiving end of a terrible customer experience. What is even worse, this is with my preferred brand.  A brand that I have had 2+ decades of great experiences and happiness with. And today – all of that is at risk. It is early enough in the year for me to make a shift and share my $50k to $100k annual spend on alternative options.

My frustration today is with American Airlines (www.aa.com)(twitter @AmericanAir). I was beginning my 2nd leg of 3 flights today spanning about 17 total hours and maybe 4,500 + miles. I have logged over 3.5 million miles with AA and its One World affiliates. I have been to each and every continent and I have been an Executive Platinum (One World Emerald) Member for about 10 years. I am a loyal customer with the singular ability to direct my spend. I choose where to spend my money and I may be choosing elsewhere.

If you have ever had the displeasure to fly through Miami International Airport (MIA) you already understand it is a challenge on good days and on bad days it is a nightmare. Customs lines are generally long. The crowds can be maddening. The inbound and outbound rush that is all too frequent in southern Florida all lead to a pressure cooker environment.

One reason for investing in the likes of Global Entry for speedier customs and immigration and AAdmirals Clubs for relaxation, work spaces, and snacks is to make the difference between a good day and frankly a frustrating travel day.

Today – the savings bank of American Airlines’ great work went flushing down the proverbial toilette. And it didn’t need to be that way. I will admit that I wasn’t in the best mood when I entered the club today. The immediately preceding phone calls had frustrated me. I was flying out the E terminal (which I detest) and on the US Airways part of the new American (which I am unfamiliar with).

AA in conjunction with its One World partners (BA and Iberia) now operate a Premium Lounge near the E Gates (this is an old Admiral’s Club location). – Note I arrived in D gates from Nassau, Bahamas and had to transit to the E terminal . There are two Admiral’s clubs in the D Terminals but those are, at best, a 10-15 minute walk to the E gates and I researched the usage of the E Terminal Priority Lounge prior to arriving in MIA. I did this because I needed some Internet time, a bathroom break, and a cup of tea. I was planning on spending my 20-30 minutes between flights being productive and relaxed.

Instead I received bitchy attitude from an AA Club Employee that only cranked me up and ultimately denied my wife’s entry that which should have been offered, even if the “rule book” didn’t think so. This is where that Moment of Truth arrives and in their moment – their truth frankly Sucked. It sucks so much I am concerned I won’t forgive and I guarantee I won’t forget.

As many of you already know, I (along with my colleagues) tour the world speaking and writing about customer experiences, great expectations, and the difference between a mediocre company and a brilliant one. The profit margins of airlines are so thin that disgruntled premier flyers are impactful. Frankly, at the amount I fly (2014 225+ total segments split mostly between Alaska and American and 2013 slighty more) they should treat anyone at my level special.   – As an additional aside, a colleague of mine who has flown more cumulative miles but not at my pace over the past few years was provided a Concierge Key – for gods sake I should have one those.

Today’s Moment of Truth has passed. A Scotch on the Rocks before takeoff has helped a little. Writing this has helped even more. Believing that you may read this and tweet about it so your friends will know to avoid AA Terminal E if possible, especially if they believe they should be invited into the Club, makes me feel even better.

It is funny, my wife who is traveling with me, and a genuinely nice person, even commented that the “lady at the desk had a bitchy attitude” – that is telling. If you want to share this – of course add #AmericanAir to your tweet. Maybe we can have them recognize this challenge.

For the record, here is the language from their website:

The AA, BA, IB Premium lounge is open daily from 1 p.m. to 9 p.m. and welcomes oneworld eligible International First Class, Business Class and Emerald and Sapphire customers. Customers traveling on an AA-operated transcontinental full fare First Class (F and Z inventory) or full fare Business Class (J and U inventory) ticket, as well as Admirals Club members departing from Concourse E, may also access the lounge

 

They would have allowed me in; but not my wife. What did they want me to do, leave her in the hallway? It isn’t like we were a dozen people. It wasn’t like we were going to drink them into bankruptcy. It wasn’t like they didn’t have the room. It was a bureaucratic response to what I truly believed was an earned and paid for accommodation. In fact she suggested at one point that she turned away another person and they quietly said ok. Well I am not that quiet especially when I believe I am within my standing. This is about the customer and not about the bureaucracy. I advised her that their website was vague and unclear. She argued with me. I launched my web browser – I read her the information – and she continued to deny my wife entrance and frankly that was a bad decision.

Her (the desk receptionist at the club) defenses were as follows:

 

  • We always have operated this way (who cares)
  • This isn’t the Admiral’s Club (like I am freaking stupid)
  • Yes your wife is on a F class ticket but is it a transcontinental flight (well if Miami to Portland via Charlotte isn’t at least a transcontinental flight at least I am crossing the continent and they don’t fly to Portland direct from MIA or I would have been on that flight.
  • Yes you are on an international itinerary but we don’t count Nassau as international (well whoop-de-do) your website conveniently omits that and by the way – the US State Department considers the Bahamas as international
  • Yes you are on an international itinerary, in first class, on full fare, but “this isn’t an arrivals lounge” – like no Shi* Sherlock. I never claimed it was an arrival’s lounge
  • Yes you are an Exec Plat member but these Premium Clubs only allow the “member” in. Really? Better check with the Marco Polo Clubs, the Qantas Club, the BA First Class Lounge – as I can guarantee that I (and a guest) are graciously admitted (not two guests by the way – so that is known).
  • I pointed out that their website was unclear. I pointed out that I was an Admiral’s Club Member. She acknowledged that. She said it doesn’t say “guest” and hence my wife of 20 years was not allowed in. This policy is stupid and their writing is unclear. And who’s responsible for that? Certainly not me as I didn’t write it.

 

She looked at me like I was an alien and she talked to me like I was a toddler – that only made my hair stand up and I can bark right back. Oh and remember, I am the customer. One should remember that. She could have said, let me call my supervisor or let me get you a cart to ride back to the general club. She offered nothing but attitude and my attitude can be loud too.

 

I tweeted about this via my twitter @morriscpa. AA has responded that they are “sorry” for my inconvenience – that and $4 will get me a Starbucks. AA wrote that they will have a customer service specialist reach out to me after my journey (yippee skippee but possibly helpful if future people can avoid this experience). At the moment AA is on probation. Because of this posting – it is not “double secret” probation. I will be the sole arbiter of the value of this relationship.   I will decide where to spend my money. I will decide whose loyalty program deserves my loyalty. I will decide if I forgive.

 

Unfortunately for them – it isn’t up them. It is always up to me.

 

Lessons learned and relearned. Your customers decide if the value exchange between their money and your service is worthwhile. Your team members, especially those on the front lines, represent the entire company in each and every interaction. That happy customers remember tell a few and frustrated customers tell the world.

 

The ball is in AA’s Court – how they respond will determine how I ultimately feel about this and how I evaluate how I move forward with my airline choices