Flint's Blog

Would You Rather Be Right or get the Right Answer?

Last November, I posted some Words To Live By that I often use throughout my business dealings to help guide myself and our management team at Billtrust.

There is another phrase that keeps coming up that I find myself quoting a lot:

Would You Rather Be Right or get the Right Answer?

We all suffer from this occasionally - in business and in life.  We come up with a new idea that we want to implement.  We present it to others in our organization.  A debate ensues, and we find ourselves arguing fervently for the new idea.  Not necessarily because it's a good idea, but because it's our idea.  At some point in any discussion of a new idea, preferably immediately, you should be debating based on the merit of the idea, not who owns the idea.

Put another way - I'd rather be wrong and get the right answer, then be right and get the wrong answer.  Seems obvious when put this way, but I think we all could use a little reminder now and then.

This came up on Sunday when I was lucky enough to bring my daughter to see LeBron James and the Cleveland Cavaliers play a basketball against the New Jersey Nets.  (BTW, you want to see a classic case of a great employee, LeBron James is it.  He works hard, he jokes around with fans and has fun, he performs under pressure, keeps his team involved, etc.  The kid is 24 years old).

Anyway, at one point in the game, a ball went out of bounds and it was difficult to determine who last touched it.  The ref closest to the play immediately called it off the Cavs and gave the ball to the Nets.  Another ref, who had a better angle, even though he was farther away, immediately went over the first ref and asked him how sure he was of his call because he was pretty sure he saw it the other way. They wound up reversing the call, got a bunch of boos from the home crowd, but got to the right call.  The refs had been trained that it's best to try and get the right call at all times.

This hasn't always been the case in professional sports.  It used to be that it was way more important for a ref/umpire to stick with their original calls, otherwise players would be questioning every call.  In the last few years this has changed.  You now frequently see referees and umpires huddling together to try and get the right answer.  This is the way it should work, even though one person has to admit that they were wrong.

Are you the kind of person that is willing to admit you're wrong to get to the right answer?

The Value of Middlemen

Seth Godin has a great post about how all sorts of middlemen are disappearing or are in the process of disappearing from the market - travel agents, stock brokers, real estate agents.

In order to survive, middlemen can't just be an extra layer between the supplier and the buyer, they must either provide significant value or they will be removed by buyers.  The reason is quite simple, the internet.  Buyers can now research suppliers themselves.  If I want to know the best price for an airplane ticket, I could probably call a travel agent, but it's far simpler to pop over to Expedia or Kayak.

I call this the Margin on Margin problem.  Profit Margin is what businesses make each time they sell a good or service.  If an airline company sells a plane ticket directly to me, maybe their margin is 5% of the ticket price.  (Probably a bad example because I'm not sure airlines ever make money).  If the travel agent sells me the ticket, they need to make a margin as well.  That margin can either come out of the airlines margin or out of my pocket. The airlines used to split their margin with the agent but no longer.  Therefore, travel agents have all but disappeared.  The ones that survived, provide a different kind of value, perhaps setting up a complicated vacation with flights, hotel, sightseeing, etc.

In the outsourced billing industry which Billtrust is part of, the middleman role is often called a print broker.  Print brokers work with billers to find a print/mail company to process their bills.  I would guess that print brokers that simply act as middlemen are in big trouble.  Those print brokers that provide billing expertise and perhaps a fuller solution will survive, the rest are going to be in trouble.  Buyers are just too smart these days and the internet allows them to shop efficiently for the best price.

Who's your industry middleman?  Are you one of them?  If so, you might want to think about your value proposition.

Should You Compete on Price?

Billtrust competes in a number of different markets with dozens of different competitors.  We like to think that we've built a feature rich solution for a reasonable price that allow companies to reduce their total billing costs over time as we help them migrate more of their customers to electronic billing and payment.

In every business you need to decide on your market positioning for your goods or services. If you were to open a "brain surgery" business, you would likely market yourself based on how experienced you are in the delicate art of brain surgery.  If you wanted to open a business selling garbage cans, my guess is you would probably go to market with the lowest cost garbage cans in town since a garbage can is a garbage can.  Being the cheapest brain surgeon in town would probably not get you too much business.

The basic rule of thumb is that the closer your product is to a commodity, i.e. difficult to differentiate from others, the more it becomes a matter of who can do it cheapest.

In this Becoming Essential blog post, Ted discusses why competing on just price is dangerous.  He separates businesses into either commodity or premier business and does a great job of describing the perils of being the cheapest vendor.

We have some competitors that have massive print and mail centers throughout the country with little or no electronic billing capabilities.  Understandably, they compete effectively by stressing how the world is still 90% paper and stressing all the wonderful paper billing features they have.

Some of our competitors have a great roster of Utility companies that they do business with and therefore stress what an expert they are in the field of Utility billing.

Each of these are good strategies, you go with what you've got.

However, we've got one competitor in one industry that has chosen to compete solely on price.  They'll send out your bills cheaper than anybody.  In fact, they'll even lose money on every bill for a period of time just to win your business. If I'm a buyer, this sounds attractive since I want to save as much money as possible and billing is billing, right?

Fortunately for us, billing isn't a commodity which we can emphasize with a very simple exercise:

Please cross off which of the following things is not important to you:

1. A disaster recovery strategy so that my bills will always be sent out in a timely fashion

2. Getting bills to my customers fast so that they can pay me promptly

3. Making sure my bills get sent out accurately each time

4. Giving my customers the option to pay me any way they choose

5. Making sure my billing vendor isn't using my private customer data to sell other services

We have about two dozen of these points that we make when we're up against this competitor.  So far so good. 

We're certainly cognizant of the fact that people want to maximize their cost savings.  But at the end of the day, if you're competing solely on price, you've got little chance of being successful in a non-commodity business.