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Certainly, at one place I worked, the higher-ups were very clear that any work on cost reduction was wasted and devs and ops should always work on increasing ne

Certainly, at one place I worked, the higher-ups were very clear that any work on cost reduction was wasted and devs and ops should always work on increasing net income, not decreasing costs. It was consistently claimed that cost reduction can only get you small percentage decreases, whereas increases in income are larger and compound better.

tomrod 5y ago
The higher ups need some basic economics education, it appears. Certainly you shouldn't invest everything in long term returns, but you should be open to it. Instead, when something has a payoff of 3 years, executives get antsy in orgs that have a 2-year cycle on exec positions.
avianlyric 5y ago
The big difference between cost reduction and income increase, is that one has a hard limit on possible upside, whereas the other does not. You can reduce your costs by more than your total costs, but it’s quite possible to increase your income by many multiples of your existing income. Result is that maximising income is generally better than reducing cost. Of course, as with all generalisation, there are situations where this approach doesn’t hold true. But as a high level first order strategy, it’s a good one to adopt.
- wolf550e 5y ago
  You meant to write "You cannot reduce your costs"
- ClumsyPilot 5y ago
  "one has a hard limit on possible upside, whereas the other does not." Thats plain wrong, the gloval market for cars, bicycles and what have you has a limited size. Every large company that's a market leader understands that.
  - beiller 5y ago
    Would capturing 100% of the market granting a monopoly essentially grant unlimited upside? Cause you can just jack the price to absurdity? Also wouldn't reducing cost to zero have an infinite upside as well? Basically zero cost you can produce infinite output. Gettin real pedantic here heh.
- bradknowles 5y ago
  My experience has been that each additional multiple of revenue has a certain amount of effort increase that is relatively fixed. Likewise, each additional percentage of cost reduction has an effort cost that is relatively fixed. If you do the math, then increasing your revenue by 2x doesn’t cost 2x the effort. But one additional percentage point of cost reduction might well cost 2x the effort. Sadly, most employers I’ve known do not seem to understand this thing called math.
kevin_nisbet 5y ago
I've had similar messages articulated to me by my manager, and have found myself articulating similar messages to my team. In my team, the key is for the state of the project/product we manage, cost optimization is likely one of the lowest ROI activities we can spend too much time on. That doesn't mean we don't tackle some clear low hanging fruit when we see it, or use low hanging fruit as training opportunities to onboard new team members, but that we need to be conscious on where we make investments, and for the stage we're at, the more important investment is into areas that make our product more appealing to more customers. I think it's easy to say someone, like an intern could pay for themselves with savings. But this to me overlooks that someone has to manage that intern, get them into change management, review the work, investigate mistakes or interruptions from the changes, etc. And then they're still the lowest earning employee, since most of us aren't hired to pay for ourselves, but actually to turn a profit for the company. So while I'm not sure I agree with the message "whereas increases in income are larger and compound better.", I certainly understand and have pushed a similar message, that we be conscious on where we're spending our time, and that we're selecting the highest impact activities based on the resources and team we have. Sometimes that may be fixing high wastage, but very frequently that will be investing into the product. And I think for the stage of the product we manage, that is the best choice for us.
lostdog 5y ago
You can do similar types of work, but target speed increases instead. Getting all the batch jobs to finish faster can help developer productivity, and is even worthwhile at a new startup.
R0b0t1 5y ago
This was verified by (what should be) a famous Harvard Business school study. Quality before cost, revenue before expenses, and there is no three.
- JHer 5y ago
  Could you share a link or give the name of the study, so that I can read it?

tomrod 5y ago

The higher ups need some basic economics education, it appears. Certainly you shouldn't invest everything in long term returns, but you should be open to it. Instead, when something has a payoff of 3 years, executives get antsy in orgs that have a 2-year cycle on exec positions.

avianlyric 5y ago

The big difference between cost reduction and income increase, is that one has a hard limit on possible upside, whereas the other does not. You can reduce your costs by more than your total costs, but it’s quite possible to increase your income by many multiples of your existing income. Result is that maximising income is generally better than reducing cost. Of course, as with all generalisation, there are situations where this approach doesn’t hold true. But as a high level first order strategy, it’s a good one to adopt.

wolf550e 5y ago
You meant to write "You cannot reduce your costs"
ClumsyPilot 5y ago
"one has a hard limit on possible upside, whereas the other does not." Thats plain wrong, the gloval market for cars, bicycles and what have you has a limited size. Every large company that's a market leader understands that.
- beiller 5y ago
  Would capturing 100% of the market granting a monopoly essentially grant unlimited upside? Cause you can just jack the price to absurdity? Also wouldn't reducing cost to zero have an infinite upside as well? Basically zero cost you can produce infinite output. Gettin real pedantic here heh.
bradknowles 5y ago
My experience has been that each additional multiple of revenue has a certain amount of effort increase that is relatively fixed. Likewise, each additional percentage of cost reduction has an effort cost that is relatively fixed. If you do the math, then increasing your revenue by 2x doesn’t cost 2x the effort. But one additional percentage point of cost reduction might well cost 2x the effort. Sadly, most employers I’ve known do not seem to understand this thing called math.

kevin_nisbet 5y ago

I've had similar messages articulated to me by my manager, and have found myself articulating similar messages to my team. In my team, the key is for the state of the project/product we manage, cost optimization is likely one of the lowest ROI activities we can spend too much time on. That doesn't mean we don't tackle some clear low hanging fruit when we see it, or use low hanging fruit as training opportunities to onboard new team members, but that we need to be conscious on where we make investments, and for the stage we're at, the more important investment is into areas that make our product more appealing to more customers. I think it's easy to say someone, like an intern could pay for themselves with savings. But this to me overlooks that someone has to manage that intern, get them into change management, review the work, investigate mistakes or interruptions from the changes, etc. And then they're still the lowest earning employee, since most of us aren't hired to pay for ourselves, but actually to turn a profit for the company. So while I'm not sure I agree with the message "whereas increases in income are larger and compound better.", I certainly understand and have pushed a similar message, that we be conscious on where we're spending our time, and that we're selecting the highest impact activities based on the resources and team we have. Sometimes that may be fixing high wastage, but very frequently that will be investing into the product. And I think for the stage of the product we manage, that is the best choice for us.

lostdog 5y ago

You can do similar types of work, but target speed increases instead. Getting all the batch jobs to finish faster can help developer productivity, and is even worthwhile at a new startup.

R0b0t1 5y ago

This was verified by (what should be) a famous Harvard Business school study. Quality before cost, revenue before expenses, and there is no three.

JHer 5y ago
Could you share a link or give the name of the study, so that I can read it?