What is your company counting?

Ask a management team what the company sells and you will get a clear answer. Ask what it counts in and the room slows down.

Consultant-hours. Licences. Seats. Tonnes. Cases handled. Whatever it is, someone chose it, usually years ago, for a good reason at the time. Then it stopped being a decision. It became the shape of the spreadsheet. Budgets are built in it. Bonuses are paid on it. The board reviews it every quarter without ever reviewing it.

That unit is the most consequential thing on the page, and the least likely to be questioned.

Three times it was the whole answer

In 1999 companies bought IT by the consultant-hour. Every engineer who touched a server was billable, so cost rose with complexity rather than value. Nobody could forecast next year. The technical work we did was real, but it was not the point. The point was to sell infrastructure and operations at a fixed rate per employee per month. One number, per head, budgetable a year out. The platform existed to make that price possible.

In 2013 mobile data roaming was priced so badly that companies switched it off when their people travelled. They had bought a capability and then told staff not to use it. That was the clearest signal the market could give: the pricing was wrong. Nobody needed better radio. They needed the unit to stop being the country you happen to be standing in.

In 2016 large enterprises took three to five years to get an idea into production. By then the idea was outdated and the person who had it had left. The unit was time. Everything else — the cloud foundation, the operating model — existed to change it to days or weeks.

Three different industries, three decades, one move. In each case, the technology already existed. What had not changed was what the business counted in.

Why the board is the only place this can be asked

Management cannot easily ask it. Their plan, targets and incentives are all denominated in the current unit. Asking whether it is the right unit means asking whether this year's plan measures the right thing. That is a reasonable question. It is also an uncomfortable one to raise about your own numbers.

A board can ask it without that cost. It is also, precisely, a board's question: not are we executing well, but are we executing the right thing. Management should answer the first every quarter. The second gets asked once every few years, if at all. Usually a competitor has answered it for you by then.

Four questions that get you there

I have never found a framework for this. I have found four questions that open it up.

What do we invoice for, and what does the customer actually value? Where those two diverge, a competitor can get in. Consultant-hours and working infrastructure are not the same thing. One is what we sold. The other is what they wanted.

What does a customer do when the price goes up? If the answer is use less of it, you are not selling something they want more of. You are rationing.

Which of our costs scale with the unit, and which do not? A unit that tracks our cost rather than their value will feel fair internally and arbitrary externally.

If a new entrant priced this completely differently tomorrow, what would they choose? Then ask why we are not that entrant. The answer is usually that the current unit is load-bearing for the budget. That says something about us, not the market.

What it is not

It is not a pricing exercise. Pricing changes the number. This changes what the number is of. Those are different conversations and they need different people in the room.

It is also not free. Changing the unit changes the shape of revenue, the forecast, and often the sales compensation plan. That is why it is a board decision rather than a commercial one, and why it takes longer than anyone estimates. All three times, the technical build was the easy part. The hard part was the year when the old and the new unit both had to be true at once.

And it is not always the answer. Most businesses are counting roughly the right thing and should get on with executing. But you do not know until you ask. Asking costs one conversation.

The version of this a board can act on

Once a year, on one agenda: what are we counting in, who chose it, when, and what has changed since?

If nobody in the room knows the answer to the middle two, that is not a small gap. It means the most consequential assumption in the business is inherited rather than decided. Inherited assumptions are exactly the ones a market eventually charges you for.

I have made a living from other people's inherited assumptions three times. It is not a clever trick. Almost nobody looks.