Mind Readings: Stop Being an Hourly Knowledge Worker Business

In today's mind readings, stop being an hourly business if you are in hourly business in knowledge work. Now, that does not mean stop being an hourly business if you are not in knowledge work. For example, if you are in plumbing, feel free to remain in hourly business. That's not going to change anytime soon. I'm specifically talking about things like marketing, communications, public relations, digital advertising, etc.

Law, anything where you are predominantly doing knowledge work and you're billing by the hour, it is time to stop being an hourly business. Two anecdotes I want to share with you. Well, first, a reminder. On September 17th of 2023, I warned you on us and everyone of the death of the hourly business. This is about a month ago now, as of the time I'm recording this, and a lot of people reacted very strongly saying, whoa, let's let's let's uh let's consider this.

So two anecdotes that happened since then. One, I was talking to a friend uh the other day who said that at a one of her friends' companies, they fired 80% of the marketing department. They fired like 80 people and just laid them off, and the remaining 20 people are doing the same workload. They're just doing it with generative AI. Are they doing it as well?

Maybe, maybe not. Are they spending a lot less on headcount? Sure are. So it's been kind of a hot mess at that company ever since. So it's not one of those things you can just do and wing it and hope everything turns out okay.

That's anecdote one. And remember, of course, anecdotes are not data, but they are things to consider and things that might be worth gathering data about. Anecdote number two. I was in an event this past week. I was talking to uh an industry leader, and they said that their peers, their agency peers, are getting beaten up really, really badly.

So it is now budgeting season, it is now you know next year's contract season, and this person and their peers are getting beaten up really, really badly in terms of getting contracts renewed. When we dug into the discussion a bit more, they said our clients are coming to us and saying, we know you're using AI. We know you're using generative AI. Everybody's using generative AI. We know that it doesn't take as long as you say it takes for a task because generative AI speeds things up tremendously.

We want an 80% price cut. We want to we want uh either change the retainer to be much less or dramatically cut the number of hours because we know that's not the amount of time you're spending on it. That was eye-opening. Right? That was eye-opening for this person and their peers.

Wow. In September, what I had said was it's time to stop being an hourly business and time to move to a value-based model as quickly as you can if you are in knowledge work because generative AI is dramatically changing our space. When you can sit down with a tool like ChatGPT and bang out an NDA, do you need to spend 10 hours and you know $5,000 with your lawyer to do the exact same thing, knowing they're going to do the use just you know stock templates and then customize those templates? Or can you do a first pass and hand it off to your lawyer to say, hey, now can you please clean this up? Um the latter is a viable strategy, right?

You are still relying on their expertise, but you are taking that grunt work out that they used to bill nine hours for. If you are in marketing or in digital advertising, it used to take a really long time to write ad copy. Now you have machines that can write ad copy and do good first drafts, and then you tune them up, you you polish them up and then you roll them out. So how do you how do you deal with this situation? Well, there's three different things you can do.

Number one, you can agree, okay, yeah, we spent 80% less time, so let's cut our cut our rates by 80%. Probably that's not going to go over well with your stakeholders and with the people who run your business. But if a client says that and you'd rather not lose that client and you'll do whatever it takes to keep, that might be an option. Two, you move to a value-based business where you say, hey, this is a project, this is what it costs. Do you care how long it takes?

No. Do you care that it gets done on time? Yes. Um, you know, do you care it gets done to the level of quality you expect? Yes.

Moving to a value-based business does take time. It does uh require changing how your your agency works, how your business works, but it is one of the ways to insulate yourself somewhat from this this sea change that's happening. And the third is if you want to remain hourly business, you've got to do a lot more per hour. You've got to deliver a lot more stuff per hour so that a client says, okay, I'm still paying you 20 hours a month, but now knowing that you're using generative AI, instead of writing one blog post, I expect you to write 20. Right?

You that's the third way, the third approach. You have to decide as a business owner, you have to decide as an employee working at these kinds of companies, you have to decide as a as a client or as a vendor. Which of these three approaches is an approach that makes the most sense to you, which is the approach that is the most sustainable for your business. I would argue that switching to value-based billing is probably going to be the least painful for you as long as you can justify, yes, here's what you're spending the money on. There's the old adage that, you know, when when someone got the plumbing bill for $5,000 and they were asked, what was all, you know, what was all that for?

You were here for five minutes. Um invoice says, work time, five minutes, knowing which valve to tighten, you know, $4,950. Um, that's kind of the the direction that proficient knowledge workers need to go. So those are two anecdotes that were very eye-opening to me this past week. Change is coming to hourly knowledge work businesses.

Change is coming rapidly. And if you're not already feeling it, you will be soon as you get to contract negotiation periods as you head into the next year. Change is coming. Even if you don't change, and if your clients may not change, you're going to have competitors who have changed who are going to add pressure in the marketplace, put downward pressure on pricing, because they can be more efficient if they're using AI and you are not, or they're using it better than you are. So your next steps, A, make a choice as to which of those three approaches you're going to take.

And B, regardless of those approaches, start getting proficient at generative AI because that's the way things are gonna go in knowledge work industries. That's the show for today. Thanks for tuning in. Talk to you soon. If you enjoyed this video, please hit the like button.

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