Imagine a simple situation presented on the map below:
There is a system that satisfies a user need, and that system is assembled out of two, mature components. When the user pays the company, money is supposed to flow downwards to all involved components, just like in a champagne tower.
The question is - what should be each component’s share in the transaction profit? It sounds simple, but let me bring you a real-life example - at my local university, didactics has been split up from infrastructure. The latter one charges the former for room usage, but there is on-going discussion whether it charges enough.
We observe similar conflicts all the time - it might be a conflict between business functions layer in the organisation vs underlying IT infrastructure, or between electricity producers and distributors.
The consideration here is important, as the last thing we want is to subsidy an ineffective component. If the university is not paying a market price for the infrastructure access, then not only the infrastructure team would be much better by selling service outside, but it could be revealed that the didactics is doing a poor job (yes, I do have a mixed feelings about this because it is a university, but in other cases… no handicaps should be given).
So, how to find out the right proportion? There are two options.
- This is preferred. If possible, look for similar services in the market. This is the price that should be paid for the underlying component service.
- Sometimes, there are no market equivalents. In such a situation you have to estimate the power and potential of each component. If they were not cooperating to satisfy this user need, what would be their fate? Could they be repurposed? Could they use some replacement? The component that has more possibilities and is less dependent on the other (to either deliver value or customers) will always get a higher share.
One thing you cannot forget is that components are a form of capital, and you want your capital to work for you no matter what you are doing. This means that your income (flowing from other components) should be always bigger than your costs, and the size of that difference depends on uncertainty (a few percent for mature components, as much as you can achieve for uncharted ones).
And if it is not a case… you have something to think about.