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account planning, business development, client loyalty, client relationships, growth, innovation, internal collaboration, key account management, Leadership capacity, Measurement, professional service firms, Sales management, strategy management

7 key enablers of smart collaboration

In Articles, Commentary on 10 March 2017 at 7:27 am

In January 2017, Harvard professor and ex-McKinsey consultant, Heidi Gardner, published Smart Collaboration. The book describes the results of her 10-year study into the benefits of collaboration in professional service firms. Gardner concludes that firms that effectively integrate cross-team solutions to solve clients’ problems will significantly outperform those that just rely on cross-selling solo-specialists:

Screen Shot 2017-03-09 at 5.13.44 pm

The book is great in making the case for collaboration, but is a little thin when it comes to the “how to” bit. This post is my take on execution, and describes seven key enablers of smart collaboration…

#1 The right clients

The business case for collaboration is much stronger when your firm is servicing [i] large client organisations, [ii] with complex and diverse needs, and [iii] relatively sophisticated approaches to purchasing professional services. For instance, a small monoline insurer with a cab-rank panel structure would not be a prime prospect.

#2 Capability breadth

Gardner states that the true benefits of smart collaboration come from combining the skills and experience of a range of different practitioners to solve the client’s most pressing problems. This multi-disciplinary approach is hard to copy, is less price sensitive and much more fun to deliver.

It follows, therefore, that firms need to have service depth AND breadth for collaboration to payoff. Larger full-service firms would have relatively more opportunity than others.

#3 A culture of “our” client, not “my”client

In many firms, the prevailing culture is one where client relationships are primarily owned by individual partners, rather than seen as assets of the firm. In these instances, distrust of colleagues to serve “their” clients is more common than not. Trying to facilitate smart collaboration in a deeply individualistic culture is a long and hard road.

Many of the professional service firms I work with think they are collaborative, but in reality they’re collegiate. The latter describes a club of friends happy to socialise together. The former describes a one-firm firm where everyone is hardwired to win and deliver together.

#4 Great client leaders

Client Relationship Partners work across practice teams to bring the best of the firm to the client, and the whole of the client to the firm. These boundary-spanners are crucial in growing the network of relationships between the firm and the client. Success is more likely if the firm empowers this important leadership role, and invests in developing its client leader talent pool.

#5 Effective client knowledge sharing

Gardner states that a “collaborative technology platform” is essential in connecting partners with the right opportunities, as well as mitigating some of the obstacles to collaboration. While I broadly agree, many firms fail to get a positive return on their CRM investments, not because of technology issues, but because the cultural and strategic settings don’t facilitate communication and knowledge sharing.

Collaboration is enhanced by partners having a good understanding of [i] the firm’s full capability set, [ii] the client’s context and needs, and [iii] the details of the firm-client interaction.

#6 Consistency in energy and standards

The outcomes of a team are significantly enhanced when all team members have similar service standards. Problems arise if one team member thinks a “responsive” email reply is 24 hours, while another thinks its 24 minutes. It also helps if all team members have a similar drive to succeed and share common values around client focus.

There are two schools of thought around consistency of service style. Those who argue for a house-style cite benefits of a seamless client experience, resource fungibility and delivery efficiencies. The contrary view is that differences in style facilitate diversity and creativity. I’m more in the latter camp.

#7 The right measures and rewards

In the words of Peter Drucker, “what gets measured gets managed”. In the words of James Goldsmith, “if you pay peanuts, you get monkeys”. If the firm incentivises solo-specialist behaviours and outcomes, the chances of meaningful collaboration are exceedingly low.

Call to action

Gardner’s research clearly illustrates the benefits of smart collaboration over cross-selling. If you sense the potential in your firm: [i] write down each of these seven enablers; [ii] give your firm a score out of 10 on each, and [iii] identify the key actions to shift the dial in the next six months, and closer to a 10 over the next 36 months.

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account planning, business development, client loyalty, client relationships, growth, key account management, planning, professional service firms, Sales management, strategy management

The Taxi Taxonomy – four things to learn if you’ve only got a taxi ride to prepare

In Articles, Commentary on 14 June 2016 at 12:06 am

You’ve got a meeting with a prospective client and you’ve left your preparation to the last minute. What are the ESSENTIAL things to learn during your taxi ride on the way to the meeting?

The Taxi Taxonomy, presented in the two-by-two below, is a client analysis cheat sheet. It is no substitute for more in-depth preparation, but provides a useful start to the intelligence gathering process. The Taxonomy suggests classifying your analysis into four Ps (to make it easier to remember):

Profit drivers* – the revenue, cost and other strategic priorities of the organisation;
Political drivers – the cultural and political state of the organisation;
Position drivers – the role and requirements of the person you’re about to meet; and
Personal drivers – their key personality attributes and preferences.

There is a continuum of data ranging from the overt to the obscure. The overt can usually be ascertained from web and social media searching. Obscure data most often comes from speaking with those with direct first-hand experience, including employees, clients, suppliers or business partners.

The Taxonomy in Practice

A client of mine gets her business analyst to prepare a one-page Google Doc summary based on the four quadrants in the Taxonomy before every client meeting. With repeat clients much of the data is the same but any new items or changes are highlighted. She then updates the Google Doc with new or fresh insights after each visit. Ironically this is usually done on her smartphone during the taxi trip back from the client.

MBA IN A DAY

For those interested, I will be expanding on this framework and presenting many others at a forthcoming public seminar called MBA IN A DAY. The seminar is targeted at mid-career lawyers looking to enhance their knowledge of business and develop a deeper understanding of their clients and prospects. Many lawyers are experts in the law but have received very little training in business. Click here to read more: http://mbainaday.strikingly.com/

Source: Fotolia

* For non-profit organisations and government agencies, this quadrant might be reframed as Purpose drivers, and include things like social charter, development strategy, cost and operational priorities and H2 and H3 opportunities.

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business development, change management, culture, executive leadership team, growth, innovation, internal collaboration, Leadership capacity, planning, professional service firms, Sales management, strategy management

10 reasons why culture eats strategy for breakfast

In Articles, Commentary on 4 September 2015 at 10:53 am

Over the past 12 months I have worked with three professional service firms that have outperformed their peers. Despite operating in flat markets they have consistently recorded double-digit revenue and profit growth. This success has come without superstar rainmakers, with undistinguished brands and with no fancy shmancy disruptive business models.

So what is it that has made them so successful?

To me it’s cultural differentiation. Not market differentiation, but an internal culture that creates value, both internally and externally. It’s a culture that’s eating strategy for breakfast, as famously proclaimed by Peter Drucker.

Based on these three case studies and other research, I posit that there are ten areas where cultural differentiation really counts.

#1 Productive politics

In firms with highly politicised cultures, enormous energy is expended addressing internal matters like performance measurement (i.e. who takes credit), partner remuneration, client ‘ownership’ and resource hoarding/sharing. Power struggles and infighting between divisions, office locations, teams, practices and individual partners distract from value creating time with clients and staff. A managing partner of leading law firm once revealed to me that he spent around 40% of his time on an annual basis making, negotiation and justifying partner remuneration decisions.

Politics is inevitable, but firms that effectively balance collective, individual and directed power have a huge competitive advantage.

#2 Collaboration

Recent Harvard Business School research has revealed that when different practice teams are able to collaborate around client needs, there is a massive positive financial impact. In one case study, the average annual revenue per client increased from US$150,000 to US$800,000 by having seven practice groups offering an integrated solution versus cross-selling seven discrete services.

Those firms that have transitioned from a “my client” to “our client” culture usually outperform those where partner autonomy reigns supreme.

#3 Consistent high standards

I recently chaired a panel discussion with three senior buyers of professional services. One of the questions put to the panel was whether there was a difference between top performing firms and the rest? Consistency was the universal response. Top firms were characterised by extremely high technical and service standards delivered consistently by everyone. In other firms they felt it was a bit hit and miss.

There is much evidence to support the proposition that successful firms are those that have cultures that are intolerant of mediocrity and expect and get high standards from everyone.

#4 Discretionary effort

Organisation cultures that are perceived to be genuinely caring, trusting and fair tend to get the best out of people. Staff are more likely to go the extra mile, to act above and beyond the call of duty, or just do that little bit more. Toxic cultures often result in lower productivity, higher absenteeism and substandard output.

#5 Continuity

In their bestselling book, The Service Profit Chain, Heskett, Sasser & Hart referred to research that showed that client satisfaction increased significantly with staff continuity. In situations where a financial services client had five different relationship managers over a two-year period only 40% clients were satisfied or very satisfied. This jumped to over 80% where there had been only one relationship manager. Continuity builds understanding of the client and fosters deeper relationships. These factors are critical in client choice, loyalty and advocacy.

Positive firm cultures facilitate retention and ensure continuity. A stable workforce also reduces the direct costs associated with staff churn.

#6 Alignment

Each of the three case study firms mentioned in the introduction to this blog post are characterised by a lean management structure. All leaders across the firm, but excluding the managing partner, still retain significant practices. In a way each team or cell within the firm has an ethos of self-sufficiency. They don’t see themselves as paralysed subordinates waiting for orders.

Alignment around firm direction, trust in leadership and a strong culture provides the glue that prevents anarchy but at the same time allows individuals and teams to be empowered. Self-management results in a significantly lower investment in planning, control and oversight and therefore more time on winning business and delivering work profitably.

#7 Busyness

In most professional services, busyness begets busyness. There is much evidence to support the notion that smart, highly motivated professionals seek to master their craft by doing good work for good clients. ‘Bring it on’ most say. In my experience the assumption that better work-life balance creates more staff engagement only applies to a minority. Consequently, one can conclude that a positive productive work culture creates more capacity to do even more work (within limits of course).

#8 Agility

If your firm is changing slower than the competitive environment around it, you’re going backwards! Firms with strong market and client-oriented cultures are really good at two things: [1] sensing and predicting trends, and [2] willing and able to make the necessary changes to adapt to different conditions. Agility and adaptability are cultural elements that are the hallmarks of successful firms in turbulent times.

#9 Fire in the belly

Business development is both a relationship game and a numbers game. Without some personal connection it’s very hard for a prospective client to develop enough trust to say yes. Equally, there will be fewer sales opportunities if you don’t show up. In tough times, there is usually a reward for those professionals with some fire in the belly and show up more often than others. The hunger to win is more intense and bears fruit in fuller pipelines and better strike rates.

#10 Execution

The last cultural element is related to all the others but is worthy of a mention on its own. It relates to the efficiency and effectiveness of implementing strategic decisions. It’s the ability to make it happen, to have the discipline and fortitude to overcome obstacles and to follow though on agreed actions. It seems so obvious, but so many firms struggle with this ‘simple’ ability to execute.

In conclusion

It is common for professional service firms describe their cultures as “collegiate”, “respectful” and “friendly”. In these tough times I don’t think just being nice is going to make a difference, to generate real value. Thinking beyond nice is incumbent of every professional service leader. Striving for true cultural differentiation will allow you to have culture for breakfast, strategy for lunch and champagne over dinner…

Photo source: http://nespresso.com

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account planning, Audit, business development, client loyalty, client relationships, innovation, key account management, planning, pricing, professional service firms, Sales management, strategy management

Adding Adding Value

In Articles, Commentary on 3 November 2014 at 8:18 am

Does your firm having adding value to clients as a core objective? I’ll bet it does.

Does your firm really measure how it adds value to clients? I’ll bet it doesn’t.

Most firms ask their clients to rate overall value for money in their client listening research. To my mind this is a generic approach to assessing value and a major missed opportunity.

A new way

I think there would be significant benefit adding a section to your client feedback tools under the heading ‘Adding Value’. This section would be tailored for each client and it would ask the client to agree or disagree with a series statements as to how the firm has added value, or what difference it has made over the preceding period. This would not be merely a restatement of activity or inputs but rather outcomes achieved and real benefits delivered.

So, for example, this section might include statements like:

Helped with the successful launch of new product XYZ and in creating 15% market awareness in 6 months.
Improved consistency of safety incidence reporting contributing towards a 5% reduction in lost-time injuries.
Reduced risk exposure to ABC claims from High to Moderate.
Settled the MNO matter with a sum $1 million less than that provisioned.
Realised incremental rental income of $500K through early project completion.
Delivered tailored training program that contributed towards a 5% improvement in staff productivity.
Helped with effective rollout of new corporate compliance program via dedicated secondee.
Rejigged proposal templates and process leading to a 7.5% improvement in the bid-win rate.

The client respondent would also be asked to identify other things, big or small, that they felt have added value. They might list some valuable off-the-cuff advice provided for free or an introduction to a valuable business contact. This open-ended section would catch all the tangental things that the client perceives have been of benefit. Sometimes the smallest things can have the biggest impact.

Ideally this value added assessment should be part of a periodic relationship review conversation. It could be used in a quantitative survey but then you miss the opportunity to have a deep dive discussion into what value is and isn’t from the client perspective.

Communicating value

Communicating the benefit you deliver is essential in justifying the price you charge. The problem is that in many professional services value is in the eye of the beholder. If Perceived Value = Perceived Benefits – Perceived Costs, then it’s incumbent on the provider to work extra hard to communicate and amplify the perception of benefit. Getting their agreement or otherwise to a series of value-added statements makes the benefit more conscious and tangible. It also reveals what elements of your offering are more valuable than others.

Finding the words

Harry S Truman once stated, ”it is amazing what you can accomplish if you don’t care who gets the credit”. One of the challenges with this suggested approach is that the client may perceive the whole exercise as a kudos claiming exercise. They might think you’re trying to steal their thunder. I think this can be partly addressed by [1] explaining the rationale for the questions, [2] describing in detail the firm’s specific role in creating the outcome, or [3] using softer phrases like ‘contributed to’ or ‘helped with’. Having the statements as propositions that the client can agree and disagree with, also reduces the risk of coming across as too self-serving.

Identifying the outcomes achieved might be difficult if the service is purely a commodity or the firm’s service role is basic compliance. However, if your firm is a non-commodity player then the only reason for not doing this is laziness or a lack of creativity.

Call to action

One simple next step is to pick a key client of the firm you have a good relationship with. Write down a series of draft value added statements and ask your client which ones they support, which they don’t and which ones are missing. I bet you’ll both find the conversation fascinating and value-adding in so many ways.

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business development, culture, growth, innovation, internal collaboration, marketing, planning, pricing, professional service firms, Sales management, strategy management

Redefining shared services

In Articles, Commentary on 17 September 2014 at 8:48 am

I think it’s time to think differently about shared services in professional service firms. By shared services I mean the HR, IT, Finance and Marketing functions.

In many firms these functions have been limited to service, support and enablement. Their job is the provision of day-to-day “back office” operational services, but that’s where it ends.

There is growing evidence of leading firms viewing their shared services as strategic capabilities and part of their competitive armoury. My observation is that these firms define their shared services in a much broader way and expect more of them. While they might not use these exact terms, the essence of this redefinition is as follows:

From IT to Technology and Digital Transformation

Last week I had the privilege of chairing the 9th LawTech Summit, Australia’s top conference for legal IT professionals. The conference heard about the billions of dollars currently being invested in legal tech R&D and the tsunami of new toys, tools and technologies that will fundamentally change the practice and business of law. The winners will either be cash-up start-ups or agile astute incumbents who use this new technology to take out cost and improve service and client connectedness.

Leading firms realise they need their IT function to address the major opportunities and threats of disruptive technology. IT’s (expanded) role is to inform and shape the firm’s strategy in particular around the potential predictive intelligence systems, operational efficiency, big data, worker mobility, workflows and innovation. Yes, firms still need computers that work, software that runs and help desks that help, but in the future IT’s most important role will be about digital transformation.

From Marketing to Brand, Growth and Client Success

Marketing in many firms is orientated towards inputs not outputs: let’s run that event, update the website, publish that blog post, prepare that capability statement, write that tender, etc. At a more strategic level Marketing’s role should be about three key outcomes – building the firm’s brand, driving revenue growth and enhancing client stickiness and advocacy.

Positioning Marketing as agents of growth raises the bar for marketing managers and elevates their internal status within the firm.

I like the term ‘client success’ in that it has a double meaning. From an external perspective it means we work to help our clients succeed. Their success is our success. Attending a client meeting as a “Director of Client Success” has a better ring to it than “Director of Business Development”. From an internal perspective it’s about being successful with our clients i.e. creating a great client service experience, winning more of their business and getting referrals.

From Finance to Finance and Business Intelligence

I’d love a dollar for every finance report I’ve seen that’s provided without any commentary, conclusions or insights. Leading firms have finance teams provide their product with more strategic value. They deliver a range of analytics and insights about the financial and strategic health of the firm. They are constantly finding new lenses and lead indicators to inform executive decision-making. They provide dashboards to practitioners to help them establish priorities, manage their time and track progress. The new finance executive needs to see themselves as truth-tellers, provocateurs and change agents.

From HR to Talent and Performance

In the July-August edition of the Harvard Business Review, Ram Charan created a real stir by arguing that the HR function should be split into two teams: one focusing on HR processes like recruitment, payroll and salary reviews, and the other focusing on strategic talent management, capability building and creating a high-performance culture. Most professional service firms are too small to justify this type of split, but the underlying argument for both roles is spot on in my view.

Creating a Pricing and Value capability

Pricing Directors appear to be the hottest job on the planet at the moment. The firms of the future will have specialist pricing functions to win more tenders (profitably) and to help practitioners get better at capturing, sharing and communicating value.

In my view pricing should be kept distinct from marketing and finance functions. Located in finance, ‘cost-plus’ thinking will start to dominate. In marketing, a ‘revenue at all costs’ bias might eventuate.

Collaboration is key

The firm of the future has each functional area deeply inter-dependent on the other. Many of the new challenges and opportunities don’t fit into a neat box. They cross over boundaries and require multi-disciplinary thinking and behaviour. For example, a new technology to assist in client reporting and connectedness will require cooperation from IT, Marketing, Pricing, Finance and possibly even HR.

COO’ed

If shared services cannot make the transition to more strategic thinking and execution, they run a risk of being “COO’ed”. In other words, having a strategy-focused general manager sit above them that keeps shared services doing largely operational work.

C titles

Titles beginning with the letter ‘C’ (CMO, CFO, CHRO, CIO, etc.) are all the rage at the moment. While “CXX” has market recognition and internal status, my problem is with the generic nature of rest of the title. For example a CIO is a Chief Information Officer. There is nothing in this title that reflects his/her role in leading the firm’s approach to technology and digital transformation. Perhaps Chief Digital Officer is better? I think titles are important and should appropriately reflect the redefined and expanded roles described in this post.

What do you think?

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account planning, business development, client relationships, growth, internal collaboration, key account management, marketing, professional service firms, Sales management, Workshop facilitation

The key to cross-selling: know what you don’t know

In Articles, Commentary on 2 September 2014 at 4:04 pm

We need to cross-sell, increase share of wallet, offer clients our full product range, make more of existing client relationships,…

Sound familiar?

One of the biggest constraints to effective cross-selling is partners/directors not knowing what other parts of the firm offer. As firms grow in headcount, capability and footprint, this becomes a bigger and bigger problem. Here are four case studies that address this challenge that you might find interesting and worthy of emulating.

CASE STUDY: 3MT

Each year, PhD students at the University of Queensland are encouraged to enter the 3MT competition. This event is about getting students to present their entire PhD to a lay audience in the most compelling and accessible way in 3 minutes. If a student can explain an 80,000 word PhD thesis that has taken years to research in three minutes, then a professional services firm partner can explain their practice just the same.

One law firm I’m familiar with has introduced a similar competition with a case of Penfolds Grange as the first prize. Each partners meeting starts with three 3MTs and a secret vote on each by all partners. The vote requires not only a score out of 10 but one key takeaway from the presentation and one client or referral opportunity. In order to increase partner engagement, eligibility to win the prize is based all votes entered and comments made. The firm’s 3MT is currently being rolled out, but the early signs are that it’s a winner.

CASE STUDY: TRADE FAIR

A leading Australian accounting firm recently adapted the trade fair concept to enhance firm-wide understanding of what the firm could offer. At the annual partners and managers conference, each practice was asked to set up a stall and spruik their wares. Each person attending was given 1,000 Firm Dollars to place orders based on the quality and creativity of the pitch, with a maximum of $300 with any one vendor. The goal of each stall holder was to win the most business.

CASE STUDY: TED TALKS

I was told recently of a firm that had created an internal TED Talks series and related YouTube channel. Extending the TED slogan of “ideas worth spreading” the firm created a platform for anyone to prepare and present a thought-leadership video. Presentations were usually under 7 minutes and some included music, poetry and drama. The talks were moderated by a small panel which also offered guidance to those submissions that were initially rejected. Linked to the video was a detailed profile of the presenter(s) together with their areas of specialty, clients and recent projects. In some instances the internal TEDs were released to external audiences. The MP Award, Most Viewed, Most Likes and Most Shares were the most sought after prizes.

CASE STUDY: SPEED DATING

A few years ago I facilitated a partners retreat of a firm that had recently merged with another firm of similar size. Many of the people attending didn’t know each other. We organised a speed dating session where everyone got to share and listen to everyone else. The instruction was for each person to speak for one minute addressing one of these topics:

What’s the one thing you are most proud of? OR
What has been a really memorable moment in your life? OR
What would you say is one of your greatest strengths? OR
In thinking about your career, what do you dream about?

KEEPING IT FRESH

Each of the ideas described above has a use-by date. The Trade Fair concept will work once, possibly twice, but no more. People get tired and bored quite quickly. It’s essential you keep both the message and the medium fresh.

I’d love to hear how your firm builds internal knowledge.

Image: Maria Esther Lopez C (Pinterest)

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account planning, business development, innovation, internal collaboration, key account management, planning, professional service firms, Sales management, strategy management

What’s wrong with the sales pipeline?

In Articles, Commentary on 24 April 2014 at 12:19 pm

Panic sets in when the phones stop ringing!

In the frantic rush to drive revenue growth, sales pipelines have become the favoured business development tool of many professional service firms. Before your firm follows a similar path, I think there are five important limitations to note particularly when it comes to selling to existing clients. To address these problems, I’ve developed a complementary/alternative approach based on the McKinsey Three Horizon Growth Model.

Five key limitations

1. Revenue not value-focused

I recently reviewed the sales pipelines of a major professional service firm and over 85% of the opportunities listed amongst existing clients were focused purely on revenue generation. The language of “sales” orientates one thinking around revenue and, in my view, creates a blindspot around other opportunities to enhance perceived value, reduce cost and improve the overall profitability of the account.

2. Reactive not proactive

Sales pipelines can encourage lazy reactive thinking that relies mainly on the client to feed the top of the funnel. At worst, firms just sit around and wait for the next RFP to be issued. Effective strategic account management demands proactive discussions with clients, challenging their thinking, suggesting things not on their radar and, if appropriate, offering unsolicited proposals.

3. Internally not externally-focused

In an interview with a senior BD manager from a large global engineering firm he lamented the fact that pipeline meetings were very internally-focused. “90% of the discussion is about us. It’s about our specific project proposals and who we can influence to get our proposals accepted. This is okay to a point, but we spend very little time talking about the bigger-picture of where the client is at and their broader strategic needs.”

4. Sales ends at a sale

The concept of the sales pipeline was first developed for B2B product organisations with dedicated salespeople. In this context, once the sale is made the sale process ‘ends’ and accountability is then shifted to production or delivery teams. In many professional services, sales does not end at a sale. Delivery is critical for repeat purchase, on-selling and referral. Pipelines focused on new opportunities sometimes deflect attention from expanding the scope of current projects.

5. Awkward language

Many law, accounting and consulting professionals find the language used to define the key pipeline stages awkward and ambiguous. One law firm client recently relayed a story of protracted internal discussion around the definition of “Initial Contact”, and significant resistance to the term “Closing” as it implied some type of manipulation and counter to trust-based selling. While this is not a flaw in the pipeline concept per se, it is a common barrier to effective implementation.

A complementary/alternative approach

One approach I’ve successfully experimented with, is adapting the McKinsey Three Horizons Growth Model (see graphic below) and applying it to a firm’s strategic accounts. There are few points to note about this adapted model:

The axes are Time and Value created in the relationship i.e. not just revenue or profit generated by the firm
Strategic account managers need to focus on the three horizons simultaneously, not sequentially
Each strategic account plan should reflect a good balance of H1, H2 and H3 actions and opportunities
The traditional sales pipeline is not ignored but absorbed into the three horizons
Sales pipeline meetings become “Three Horizon Meetings” with a broader agenda
There is potentially much benefit is working with your client in creating and updating the key points under each horizon.

Your thoughts

I’d welcome your thoughts and experiences in using the sales pipeline. Does it work well? What are some of the limitations you’ve noted? Do you think the Three Horizon Model is a useful addition to your toolkit?

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client relationships, executive leadership team, innovation, internal collaboration, Leadership capacity, planning, professional service firms, Sales management, strategy management

Three essential topics for your 2014 strategic agenda

In Articles, Commentary on 14 January 2014 at 11:26 am

This is a good time to do a quick stress test of your firm’s 2014 strategic agenda.

Looking at the list of strategic priorities you should be asking: [1] is there a reasonable balance between today’s business and tomorrow’s business; [2] have we been brave enough in tackling our sacred cows; [3] have we adequately addressed client, market and competitive challenges; [4] is the list too long/are we trying to do too much; and [5] is everyone committed to the same list?

You may wish to take your stress test one step further by asking whether these three critically important topics have been considered:

Innovation
Co-venturing
Leadership capacity.

Innovation

Late last year I was quoted in The Australian Financial Review and The Australian on the rapidly changing dynamics of the legal and accounting markets. What’s clear is that these markets are displaying classic signs of market maturity: new entrants, product commoditisation, mergers and client demands for more and to pay less.

The old saying, “when the going gets tough, the tough get going”, could not be truer. Firms that are not looking to innovate and make step-change improvements will simply fail. The market will no longer tolerate mediocrity.

The problem with “innovation” is that it’s very broad concept and means many things to different people. My strong advice is that if you want to address innovation in your firm, you need to define it for yourselves. Without this clarity, everything will quickly be lumped into the innovation bucket and when it’s everything, it’s nothing.

To illustrate how you might commence on this innovation journey, I recently ran a successful half-day “kick-start” innovation workshop for a client (XYZ). The workshop yielded two key outcomes: XYZ’s specific definition and approach to innovation and five high-impact innovation opportunities for the firm to action. The workshop covered:

Why is innovation important
Types of innovation inc. process, product, people, pricing and positioning
Reshaping culture to become a more innovative and agile firm
Case studies in successful innovation amongst professional service firms
XYZ’s definition and approach to innovation
Brainstorming XYZ innovation opportunities
Priortising the XYZ’s best ideas
Action plans to advance XYZ’s innovation approach and to develop the top few ideas.

Co-venturing

The second strategic agenda topic is about asking the question: “which other businesses in your universe would be best to partner or co-venture with?” Co-venturing might enable rapid entry into new markets, accessing new technologies, acquiring complementary capabilities and de-risking new product development. Partners might include other types of professional service firms, suppliers, intermediaries and even competitors.

Traditional firms might be able to leap-frog the innovation and R&D process by partnering with a start-up business with a new service delivery model. This is one option to avoid disrupting your core operations and to bypass conservative cultural constraints prevalent in many firms.

One great co-venturing example is the initiative between environmental engineering firm, Energetics, and accounting firm, BDO. They’ve worked collaboratively to provide carbon auditing and assurance services in Australia. The two parties have brought complementary capabilities to the table enable each to compete more effectively:

BDO – audit process and risk management; in-depth knowledge in the audit of company finances, financial accounting systems and performing transactional-based audit analytics.
Energetics – well-recognised emission knowledge and reputation across wide range of industries; largest group of technical specialists in Australia in greenhouse reporting, grants and renewable schemes.

Leadership capacity

The third critical issue that all firms should examine is their leadership capacity. I see many firms with highly skilled CEOs or Managing Partners but with moderately competent team leaders. Teams, be they client, work-type, office, internal service, project or industry teams, are where all the action happens. They’re the bedrock of the firm.

In the past, a buoyant market masked the lack of leadership talent and allowed teams to thrive largely on auto-pilot. This, in my view, is no longer the case. If your firm does not have the current and future capacity to lead teams, it will always under-perform and succession will become a major headache.

Developing leadership capacity is not a quick-fix, easy issue to address. It’s NOT about running a 2-day leadership training program and expecting everyone to walk out as Nelson Mandela. 27 years in jail is not a feasible alternative either!

Building leadership capacity is about a systematic developmental approach tailored to each individual. From experience, it’s expensive, risky and delivers returns over a long time period. In other words, a prime candidate for the ‘too hard basket’. Notwithstanding this, there is much merit in doing an honest assessment of your leadership talent and to develop a plan to address the key gaps and to realise the potential that’s there.

Dread or delight

In 2014 we have the FIFA World Cup in Brazil, the Winter Olympics in Russia and a mouthwatering cricket test series in South Africa to look forward to. With a robust strategic agenda in hand, hopefully you are looking forward to 2014 with more delight than dread. I wish you and your firm everything of the best for the year ahead.

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business development, client relationships, key account management, pricing, professional service firms, Sales management

Smarter Relationship Pricing

In Articles, Commentary on 14 November 2013 at 2:01 pm

Written by Joel Barolsky and Colin Jasper*

Most pricing literature focuses on how to price a product or a discrete service. Far less has been written or researched on relationship pricing. This creates a significant challenge for those involved in pricing professional services as many arrangements between buyers and sellers are relational rather than purely transactional.

By relationship pricing we mean a pricing arrangement that covers multiple transactions over a period of time and where there’s some commitment from the client and from the firm to do business together.

The most dominant form of relationship pricing is discounted hourly rates. Many firms offer their priority clients discounted rates as both a symbol and a reward for a more valuable relationship. Similarly, many clients seek to lock-in discounted hourly rates for a period of time by setting up preferred provider panels via tender.

There are a number of problems with this approach. Firstly, there are few incentives for the firm to invest in a new service delivery model or in technology that could significantly reduce cost. Typically within the discounted hourly rate model, major cost reductions over time result in reduced firm revenue without improved profitability. While in the short-term this appears to benefit the client, in the long-term it significantly slows the pace of service innovation and the potential for step-change efficiency improvements.

Secondly, there are few incentives for the firm to provide breakthrough ideas and service that delivers a quantum improvement in the client’s business. With a discounted rate model, the only reward for truly outstanding results maybe the chance of a greater share of wallet or just a good vibe.

And lastly, the total system costs are often significant, especially in “second bite” panels where clients ask panel firms to re-compete for discrete projects. In these instances, the client has to go through a process of briefing firms, addressing issues, receiving proposals, assessing proposals and informing all parties of the outcome. Each of the panel firms has to invest significant time and effort in preparing and presenting their proposals. If one properly accounted for all this non-value adding activity by each participant for every transaction, it’s painfully clear that over time the whole arrangement is lose-lose.

Incentivised retainers

One form of relationship pricing that is worth exploring in more detail is what we call incentivised retainers. It doesn’t suit all circumstances or relationships but has a number of elements that set the scene for better outcomes for both the firm and the client.

At its most basic level an incentivised retainer has these characteristics:

An underlying intent to achieve the strategic objectives of both parties
A joint focus on ensuring quality outcomes
Agreed incentives for the firm to improve their performance on things that matter to the client (eg. end-customer satisfaction, speed, consistency, reduced rework, reliability, managed risk)
Agreed incentives for the client to help the firm reduce their costs
An efficient and effective process to deal with matters outside of the agreed scope
On-going processes to ensure a positive and constructive relationship.

Some interesting examples of these retainers or variations of this theme include:

A client whose primary focus was not to exceed their annual budget entered into a retainer arrangement with a single firm at 95% of the budget. To encourage the firm to find cost savings, the contract was offered to be renewed at 95% of the previous year’s budget. While both firms have the option of exiting the relationship at the end of each year, the arrangement has now been running successfully for several years.
A client gave one firm all the work of a particular type on a medium-term transparent retainer arrangement. This arrangement encouraged the firm to invest in new processes and technology that radically improved cost-to-serve. Having greater cash flow certainty allowed the firm to make these investments and to date it has yielded significant benefits to both parties.
A client wanted to encourage genuine competition for a long-standing incumbent firm. They had established a panel, however this had minimal impact in changing the buying behaviour of a broad range of instructors who had deep relationships with the primary provider. An innovative competitor entered into a retainer arrangement based on agreed resources in order to provide the client with a credible high quality, cost effective alternative to an embedded incumbent provider. Individual instructors could continue to use – and pay for – their preferred firm. Alternatively they could access the innovative competitor at no charge, as the retainer was paid centrally.
A client sought greater price consistency from one project to the next. An incumbent firm with significant historical data was able to analyse past projects, classify them into three categories, and provide a staged fee structure for each category. They then converted their pricing from hourly rates to task-based billing – at a price-point that was neutral to both parties – in order to meet the client’s primary objective.
Firms who put a proportion of their remuneration at risk, at the sole discretion of clients, based on their overall satisfaction across a range of projects over a set time period.
A client who wanted the flexibility to utilise a range of firms at different price points offered annual retainers to multiple firms. Selected firms were encouraged to work together on a range of projects to maximise the value to the client. Retainers were reviewed each year based on the client’s perception of the contribution made by each firm during the prior year.

Limited only by imagination

The opportunity to establish incentivised, relationship-based retainer arrangements is limited only by the imagination of the participants. While many firms offer creative arrangements, not all meet the specific needs of the clients. In our experience, the best arrangements have been created by firms and clients working together to find mutually beneficial solutions. What are the most innovative arrangements you have seen?

* Colin Jasper is Director of Jasper Consulting and one of the world’s foremost experts in professional services pricing

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business development, client relationships, executive leadership team, internal collaboration, key account management, professional service firms, Sales management, Training

The story of the leader, strategist and salesperson

In Articles, Commentary on 11 October 2013 at 12:37 pm

I was asked recently if there was ONE FACTOR THAT LED TO FAILURE of key client programs in professional service firms more than any other? My answer was that most firms don’t really understand the Relationship Manager* (RM) role and consequently make poor selection and development decisions. Their starting point is that the RM is a key point of contact for the client and a co-ordinator of client development activity. In my view, the starting point should be that the RM is a business builder with a profound strategic role, both internally and externally. They are the champions of building the firm’s relationship capital.

The way I see it, the RM is a blend of leader, strategist and salesperson. As a leader they inspire the internal client service team and all other stakeholders across the firm to collaborate and deliver on the promise. As a strategist they can think think big and dream large, beyond their technical specialisation, and craft a cunning game plan that will realise new value-creating and long-term relationship building opportunities. And as a salesperson they have fire in the belly to get things done and to influence fee-paying clients to say ‘yes’ more often than not.

As illustrated in the graphic below, when one of these characteristics is absent, the execution of the role is potentially compromised:

This idea has important implications for:

Selection – Most professional service firm tends to select RMs who historically have the best relationship with the client. While there’s obviously some merit in this, I’d argue that future growth of the firm-client relationship is more dependent on the RM being an effective leader, strategist and salesperson that any legacy factors. In reality this is often easier said than done given firm politics and client preferences. But I warn you, if you just persist with same old same old, don’t expect any fireworks.
Development – It is interesting to observe the emergence of a new breed of strategic account management training courses that are in effect leadership development programs with a client analysis and BD flavour. These courses have largely evolved because of the recognition of leadership capability being so crucial to the effective execution of the RM role. If your firm currently has a leadership development program in place, perhaps tailoring a module for the RMs in the group would be helpful. Similarly, if you’re running a sales/CRM skills initiative you should look to complement it with leadership and strategy elements.
Support – Your firm might not be blessed with an abundance RM Superstars to choose from. This potentially means fulfilling the role not through one person but a team of both Marketing/BD people and other practitioners. In this instance supporting the RM with the right people and getting the team to work effectively and efficiently is crucial. A good illustration of this comes from a mid-tier Australian law firm that decided to appoint a Client Relationship Partner or CRP (equivalent to RM) and a Strategic Account Manager or SAM for each of its key clients. The CRP had stewardship over the whole relationship but the SAM was a Senior Associate from another practice group also servicing that client. The SAM’s role was to do a lot of the ‘heavy lifting’ and support the CRP with leadership, strategy and sales activities. The firm adopted this model as its Marketing and BD Department comprised just one person.

Too many clients?

Perhaps the most profound implication of the Leader + Strategist + Salesperson hypothesis is rethinking how many GROWTH clients you should have. Maybe this decision should be based more on how many RM Superstars you have available (or could hire in) and less about the traditional client selection criteria of revenue, profit, service range, etc. Perhaps you should only have a Top 3 or 5 where you genuinely have those limited numbers of RMs with the capability to take a good relationship and make it great. Having 20+ GROWTH clients might give you a warm glow and receive wild applause from the equity holders, but frankly you’re probably setting yourself up to fail.

* The Relationship Manager is sometimes referred to a Client Relationship Partner (CRP), Client Relationship Manager (CRM) or Strategic Account Manager (SAM).

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A blog by Joel Barolsky of Barolsky Advisors

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