FOBO Episode 3: Revenue Generating vs. Overhead

FOBO Episode 3: Revenue Generating vs. Overhead

Welcome to Episode 3 of Fear of Becoming Obsolete (FOBO). I am Tom Auld, your friendly neighborhood Product Owner.

Today we are going to talk about your team. Are you in a team that generates revenue or are you overhead?

It may be a bit out of your direct control, but how your team is positioned in the organization will impact your chances of becoming obsolete.

Grab a cup of coffee, tea, or favorite adult beverage and let’s talk about staying relevant at work.

A question came in after episode 2:

“Why do you focus on fear? Isn’t there a more positive approach?”

First off, thank you for the question. It has been amazing to see the level of interaction these videos have started to generate, and I invite you to get in on the action.

Why do we focus on fear? I view fear as one of our strongest and most powerful emotions. Fear is a natural and “automatic” human response, and can in fact, serve to help protect us from harm. While fearful behavior can be destructive, feelings of fear themselves are merely a signal that we may need to do something.’

The American writer, H.P. Lovecraft wrote “The oldest and strongest emotion of mankind is fear”.

My intention is to inspire hope, but it seems like more change happens where there is an element of fear. That is not my favorite answer, but it is an honest answer.

If you have a different take on that, I would love to hear about it in the comments.

Last episode we focused on yourself and your individual skills in the job market. Today we focus on your team.

Just to ground us on a few terms:

TEAM could mean the other human beings you work with and report up to the same manager OR it could be the general area of the organization where you work.

It is up to you to make that call. For the sake of this conversation, I am going to call everything a TEAM.

Teams fall into 2 categories:

· Revenue Generating

· Overhead

Revenue generating teams do just that, they generate revenue. Typically, sales, marketing, and business development are functional areas that generate revenue for companies. Depending on your company and your products, you might be unique.

Overhead teams support revenue generating teams or the general operations of the organization. Overhead is any cost that you pay before a single customer decides to give you money.

Overhead does not include the cost of raw materials or ingredients that go into your product or service.

Legal, accounting, finance, and operations are typical overhead areas of a company.

Think of it this way; when you go to your job you are generating revenue for yourself. When you pay your mortgage, that is overhead. Quite literally, over your head.

Alright, enough with the boring finance jargon.

If you are on a revenue generating team, you are extremely valuable to the company. If no income is coming in you can’t pay salaries, office rent, and electricity. It is impossible to run a commercial business without income. This is why it is such a priority for companies.

As part of a revenue generating team, you are responsible for maximizing that revenue. You want to get more customers buying more products as often as possible.

You look for new ways to sell. You expand your market globally. You add new functionality to your product to make people stand in line to by the newest model.

The challenge on this team is when to know when your product is becoming obsolete, your customer no longer finds your product valuable, or you have sold your product to everyone that wants to buy one. There is no one left to sell to.

This is a real issue. Companies start seeing success in one area and think the ride is going to last forever. The double and triple down on an idea and stop innovating because they are too focused with making all the sales they can today.

Let’s consider Peloton.

Peloton makes high end exercise equipment for you home. They are beautifully designed. They had a team of white gloved delivery people setting it up for you and getting it hooked up to your WIFI. There is zero friction between you ordering it and you taking your first spin class.

Their special sauce was the live classes. These classes added energy and a sense of competition to every workout. It also added a sense of community, which is something we were all desperate for during the pandemic.

At the peak of their value, they were worth $50B. Customer satisfaction was off the charts. Nothing could stop them.

Approximately 24 months later they had to layoff 5,000 employees. Their current market value is hovering around $4.5B. A drop in value of 91%!

Peloton execs said at a conference call:

“We’ve made missteps along the way. To meet market demand, we scaled our operations too rapidly. And we overinvested in certain areas of our business”.

Just because you are on the revenue side of the business doesn’t mean things can’t change quickly. You will want to be aggressive in maximizing the revenue, but you need to be conservative in determining how long this success is going to last.

Make sure you are investing on your “next big thing” while you are cashing checks for the “current big thing”.

“The time to repair the roof is when the sun is shining” is a quote from President John F. Kennedy to illustrate this point.

But not everybody is on the revenue generating side of the business. Some of us must keep the business up and running.

Traditionally overhead is between 20-35% of the business budget, but it can go up to 50% for some organizations. And many times, it is tied to the number of sales a team has.

Any way you calculate it, this is where companies always look first when times get lean. “What is the least we can afford to spend on operations this month to be profitable? What is the least number of humans we need to keep this place up and running?”

It is always easier to cut costs then to increase sales. You can instantly reduce costs, but you cannot instantly increase revenue.

If you find yourself on this type of team, you just need to understand where you are and ask yourself these questions.

Can your function be outsourced? Can our accounting department be moved to Deloitte. Can IT be moved to TATA?

Can it be automated? Can HR be moved to self service via Workday. Can our call center become IVR (interactive voice response) to handle 95% of our calls?

Companies are constantly under pressure to reduce costs. You need to understand where you are in that conversation. It can happen anywhere.

Case in point.

In 2004, Best But outsourced almost their entire IT department to Accenture.

On Friday, 95% of the IT employees wore Best Buy employee badges. On Monday, they wore Accenture badges. This impacted about 800 people.

Still stuck on if you are in a revenue generating team or an overhead team?

Consider these questions:

Is the business publicly talking about the work your team is producing or the product they are building? If so, you are in a good spot, for now.

Does the org keep switching your team around and having you change focus every 3-6 months. Danger Will Robinson, the company doesn’t know what to do with you and you might want to be cautious.

·Does your team have a self-contained budget or is it part of a bigger pool of money?

If you are part of a bigger pool, you might be at risk. Especially if your boss is not the final decision maker.

If you have full control of your budget, that is a good sign. The company is directly investing in you. Show them what a good decision they made by creating value.

Remember, it is in your best interest to understand where your team falls on the importance scale for your company.

When tough times come up, the company will cut teams and functions and not necessarily consider the individuals on the team.

And just because you are on an overhead team, does not mean you are on the chopping block. It just means you need to focus on ways to reduce cost, increase productivity, and add new services and features.

All organizations need both sets of skills.

Make sure to know where you stand and continue to monitor the situation.

Be prepared to make a move when you start to feel obsolesce coming your way.

I suggest you always keep an active network, inside and outside of the company that you can turn to if you ever decide to change teams.

We will dedicate an entire episode to networking, but just know to do some networking today. Think of it as fixing your roof while it is not raining.

What did you think? Did we add value for you today? Did we hit on a nerve? Did we leave something out? Please interact with us in comments or send us an email at FOBO@AuldLLC.com.

Don’t forget to check out our other FOBO videos at our website and YouTube channel. Please like, comment, and subscribe. Every little bit helps.

Lastly, let us know if you have ideas, questions, or topics you would like us to address in a future episode. We would love to hear your stories and share them in an upcoming episode.

This is your friendly neighborhood product owner. Thank you for joining us today and I look forward to connecting with you in the future.

Take care.

Tom

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