[abakker]

Cutting costs is always a marginal thing, because businesses tend to value growth. Oversimplification: If you have a 50% margin business, the value of one more dollar of revenue is $.50. If you cut costs and change the margin to 55%, then you've added only $.05 of revenue to that additional dollar.

Now, a sane person will look at the improvements to margin across the whole business and still want to make those improvements because in aggregate, they add up, BUT, you cannot improve margin forever as a strategy. Eventually, hard limits come up and the incremental gains shrink and shrink. At that point, growth dominates.

Most mature businesses need revenue growth much more than they need marginal internal gains, especially because as businesses get bigger, marginal gains tend to apply to more limited segments of the business. E.g. improving one product is marginal and applies to only the sales associated with that product.

I think the claim that data science is about moving the bottom line is right, but I think the other way of thinking about this is that Project/Consulting is probably a more relevant way for companies to buy these skills than Salary. Many companies can see the value in an incremental move in the bottom line, but most companies don't have a sufficiently large problem space to worry about paying a continuous cost to focus on this.

I've seen a lot of big companies say that they need these skills, but also believe they can't attract talent because they wouldn't be able to keep a data scientist busy.

[a4isms]

I've been a part of this argument before. I have another, additional perspective on why growth is more important than cost-cutting in many cases. If there are costs to be cut, you can cut them today, you can cut them tomorrow, they're right there and eventually, you can hire someone/buy something to cut those costs.

But growth is a tricky thing. If you're in a land grab market and you cut your costs at the expense of growth, you may find that you lost your chance to grow, because the market is now dominated by other people.

For people with this mentality, they expect in the long term to cut costs, but only after growth has slowed for reasons out of their control, e.g. the makret is stabilizing and has already chosen the #1 big gorilla, the #2 little gorilla, and numbers #3 though #100 small monkeys picking up scraps.

[i_am_proteus]

And if you cut costs in a (prospective or current) operating area from 120% of revenue to 90% of revenue, you've opened up an entire new operating area to profitably grow in.

Developing the technology to do a thing profitably that previously could not be done profitably is the stuff unicorns are made of.

[abakker]

Absolutely! I hope my reply didn't imply that I thought there was no value in doing things more efficiently. There clearly is, and as consumers we love marginal gains in product quality, efficiency, and price.

I'll nitpick a bit to ask, though, how many times has a new entrant to a market gotten a process/business/tool/etc from 120% operating to 90% through marginal gains? I'd wager almost never. Process improvement can be marginal or stepwise/punctuated. I think most unicorns create punctuated change in ossified industries, but, I don't think any big companies are likely to hire a data scientist and through years of grinding through the margins achieve that 30% improvement.

put differently, the decision to focus on revenue vs profit is a decision that typically does not include the NPV of R&D investments. those are uncertain and have some probabilistic value, but not so much in accounting terms.

[marcosdumay]

Competition in mature industries is all about processes costs becoming 110% or 90% of revenue, usually through a series of marginal changes.

That's not how unicorns are made, but it's how most of the economy operates.

[Karrot_Kream]

> Eventually, hard limits come up and the incremental gains shrink and shrink. At that point, growth dominates.

The trick is understanding where the hard limits are. I've noticed that upper leadership tends to be pessimistic about these hard limits (they come quickly) and engineers on these teams tend to be optimistic (there's a lot of fat/cost to cut so the hard limits are quite far down.) Now naturally, the engineers on these teams have a vested interest in being optimistic, as their team charter is based around their work. But I've seen this conflict play out in many organizational situations and I'm not sure this interplay between upper leadership and engineering about these margins is illuminating for the business.

[dh2022]

Not to nitpick, but 5% improvement profit does not apply to the additional dollar. It applies to all the revenue.... So the improvement could be massive.

[abakker]

That what I meant when I said the decision would be weight to do that because in aggregate it pays off, but, the payoff for those one time things is not fully retroactive. E.g. for sold products it does nothing. For services, it can be much better!