Tuesday, July 30, 2019

The Benefits of Targeting Fewer Markets

Beyond a robust economy, where does growth come from? In my experience, most firms seek growth by moving into new markets. But the most successful firms I've worked with serve only a few (typically 3-5) core markets. Large firms, of course, can serve many more markets and still offer substantial resources devoted to each. Small to mid-sized firms, on the other hand, are wise to concentrate their more limited resources on fewer markets.

Research supports this approach. From strategy guru Michael Porter to professional services consultant extraordinaire David Maister to Hinge Marketing's study of high-growth firms, the advice is consistent—it's better to go deep than broad. Professional service firms that focus on a few markets not only grow faster, but are generally more profitable. This has been evident among the small to mid-sized firms I've worked with over the last 25 years. Market-focused firms commonly have profit margins that are 2-3x that of diversified firms.

How can this be? It's really pretty simple: Knowledge of the client's business creates added value. Many technical professionals seem to think that it's how much they know about their own business that really matters. But from the client's perspective, they find greater value in our services when we can tailor them to their specific needs, which is possible only when we understand what they do and how they succeed. Market specialization also leads to better consolidation of internal resources and competencies, leading to greater efficiency.

There are, of course, some advantages to market diversification. Specialization can make you vulnerable to a downturn in a market sector you're heavily invested in. Thus many firm principals consider diversification a less risky strategy than focusing on a few markets. Even in a strong economy, different markets grow at different rates. Market diversification may elevate your chances of being in the right place at the right time. 

But market diversification has its shortcomings. Many firms boast of their breadth but offer little depth in terms of client sector knowledge, specialized expertise, or marketplace reputation. Diversified A/E firms often face organizational hurdles as well. It's harder to pool resources, build strategic consensus, collaborate across business units, avoid turf battles, or cross sell services when spread across multiple markets. 

While in theory market diversification offers greater flexibility to respond to shifting marketplace trends, I've seen this ability frequently hampered by internal competition. Concentrating management attention and resources on a promising market sector typically means diverting it from one or more other sectors. Many firms find this difficult to do, and their diversity ends up constraining rather than enabling their strategic dexterity.

So let me offer some advice to those firm leaders who recognize the need for strengthening their firm's market focus:

Pick a few target markets to focus on strategically. Your selections may be guided by a number of criteria—current revenue, sector growth potential, firm experience, staff expertise, etc. This may or may not involve choosing to exit other sectors—which is worth considering—but I'm not suggesting ignoring other markets on which you depend or compromising your financial performance. The intent is to give special attention to positioning your firm as a key player within your target markets (which are likely defined both by client type and geographic area).

Assemble market sector teams. You want to assemble individuals who will form your "centers of excellence" for each target market. Each team should have a committed leader to keep the effort moving forward. These teams will be responsible for driving the activities mentioned below. Give them this particular charge: Determine how to increase your firm's market share within your target markets. Don't merely settle for a "growth share" in a growing market; that's not a strategy for sustainable success over the long term.

Do your research. Client and market research seems to be an area of weakness in most A/E firms. As I noted in my previous post, firms that do frequent research grow at a much faster rate and are more profitable. In this case, developing your credentials within your target markets requires considerable knowledge about those markets and key clients. Adequate research is essential.

Actively participate in relevant trade associations. This involves more than attending meetings and conferences; you want to contribute to the organization's mission. Committee or task force participation is strongly advised, especially where you can help address technical, legislative, or regulatory issues of importance to that industry. This positions your firm as an advocate for clients in that industry, not just another firm seeking to do business with them.

Target marketing efforts on those core markets. As I've written about previously in this space, effective marketing is that which serves clients. Deep understanding of your clients' business enables you to better serve their needs and interests through your marketing. Don't make the mistake of focusing on promoting your firm's technical services or projects. Instead, address those issues of greatest importance to clients through a content or inbound marketing strategy. This helps establish you as a thought leader within your core markets.

Set up a system to share market information. You want to build organizational competency within your core markets, which means sharing the information and insights you accumulate through research and experience. Many firms default to simply posting this information on their intranet, but that's far too passive an approach to facilitate knowledge sharing. Instead you want to schedule regular meetings or conference calls for your market sector teams to share this information.

As I often tell firms, there's a big difference between serving a market and being viewed as a key player in that market. How do you think clients in your target markets think of you: As an outsider offering services to them or an insider working for the betterment of their industry? Yeah, it takes a considerable effort to position your firm in the latter category. That's all the more reason to focus on a few key markets.

Wednesday, July 17, 2019

Really Busy? Now's the Time to Get Marketing Working for You

Business is booming, so why take the time to read an article on marketing? You have more pressing matters, don't you? Depends on your perspective. Are you just riding the wave for as long as it lasts or are you planning ahead for sustained success in any economy? Are you taking whatever sales opportunities come along or are you specifically targeting certain markets and clients for growth?

Here's the thing: Marketing (as contrasted with sales) is almost never a priority in the A/E business. When times are good, we're happy to think that marketing is humming along in the background, keeping our name out there and polishing our reputation in the public square. But when business drops off significantly, marketing is one of the first expenses to be cut (witness the many marketers shown the door during the Great Recession).

Odd, isn't it? When we need new business the most, marketing is one function we decide we need the least. Why? Because most firms don't really expect much from marketing, and they don't track marketing outcomes enough to know really what to expect.

The crux of the matter, in my opinion, is the loose connection that typically exists between marketing and sales. This came into focus again for me as I was assessing the marketing function for a mid-sized engineering firm. In interviewing their key seller-doers, several openly questioned how much marketing contributes to their sales success. Even those who viewed marketing most favorably could only speculate how marketing might improve their ability to sell.

Why do we need marketing if not to help us sell more? The problem is that most firms can't explicitly show where marketing improves sales performance. The benefit is only assumed. Now is the time to put such assumptions to rest and identify demonstrable ways that marketing increases sales success. Why now? Because when your seller-doers are too busy to sell, you need effective marketing to help keep the pipeline full. Marketing also helps you better position your firm with the markets and clients you really want to do business with.

Another key reason for investing in marketing now, as I alluded to at the beginning of this article, is building a hedge for the inevitable downturn. It's always easier to optimize your business development process in good times than when you're desperate for work. The Great Recession hit most firms hard, but others did pretty well. The primary difference between the two groups, according to research, was not external circumstances but internal competencies. There's no better time than now to be strengthening your marketing capabilities.

I'm quite bullish on the potential of marketing to deliver tangible, bottom-line benefits in good and bad times. But not in the usual configuration. Marketing needs to go beyond the ethereal image building and collateral creation, and help drive the sales process. It needs to be the clearinghouse for marketplace insights. It should be a prominent voice in shaping business development strategy. That's the role of marketing in most industries. Let's make it that way in ours.

A few thoughts on how to make that happen:

Your marketing should be a substantial lead generator. Done right, marketing and sales aren't just complementary activities; they are different stages of the business development process. Marketing attracts interested buyers; sales secures their commitment to do business together. Sound overly idealistic? Data and experience prove otherwise.
Let's first contrast two approaches to marketing: (1) outbound marketing (the traditional method) is centered on producing promotional content like press releases, advertisements, brochures, and newsletters that focus on your firm's activities and accomplishments; (2) inbound marketing is centered on producing educational content like articles, white papers, blog posts, regulatory alerts, conference presentations, seminars, webinars, and newsletters that focus on issues of vital interest to clients.

Now some data: Companies that employ inbound marketing generate over 3x as many sales leads and spend 62% less than those using traditional methods. Professional service firms that generate half their leads online through posting valuable content grow 4x faster (unfortunately, the A/E/C industry only produces 8% of its leads online). According to Zweig, A/E firms win 74% of the time when the sales lead comes through their website.

I could go on with the evidence, including from my own experience as an A/E firm marketer, but you get the point—the best way to start integrating the marketing and sales functions is to turn marketing into an effective lead generation machine.

Shift focus to creating content that serves clients. This is inherent in making the change to inbound marketing, but I think additional emphasis is warranted. Transitioning from self-congratulatory content to client-centered content is a big step for many marketers in our business. Unfortunately, many of them think they're already doing content marketing (essentially a synonym for inbound marketing) because, well, they're creating content. But content that serves the interests of clients is far more effective than the usual promotional content.

Seller-doers often help stunt the transition to client-centered content. What they usually want marketing to produce are service- and market-specific brochures and SOQs to hand out to buyers. But an article, white paper, or checklist that offers advice and information directly relating to the buyer's concerns works better, in my experience. Content that demonstrates your expertise is always better than content that just tells about it.

Don't let proposal production consume your marketing resources. This is the classic marketing challenge in smaller firms, and even in some larger ones. The so-called marketers in these firms spend the vast majority of their time working on proposals (a sales activity). But the real problem is that they often are spending 65-75% of their time on losing proposals. That's a tremendous opportunity cost.

I know, we've grown so accustomed to this that it's become normative in many firms. But firms in the top quartile in overall financial performance sport win rates of 10-15% higher than average. Best way to get there? Be relentlessly selective. One of my clients during the last recession, a 100-person engineering firm, was struggling mightily in acquiring new business. After studying their situation, I advised that they cut the number of proposals they submitted in half. They were stunned.

But eventually they (mostly) agreed to try my approach. They reduced the number of proposals the following year by 42%, increasing their win rate to 46% from 26%, and increasing sales by 31%. A key factor in their turnaround was reallocating marketing and seller-doer time to focus on higher-priority lead generation and sales pursuit management. That resulted in a much better integration of the two BD functions.

Consider getting marketers more actively involved in guiding key sales pursuits. I just made the case for preserving marketers' time for marketing. Do I now contradict myself? Technically yes, but I have a broader objective in mind—the integration of the marketing and sales process. Keeping marketers strictly within their marketing box doesn't help achieve this goal. Nor do we want seller-doers to be uninvolved in marketing. The two should work seamlessly.

The seller-doer model still predominates the A/E profession, and it has many advantages. One big disadvantage is that when seller-doers become overwhelmed with doing, they aren't likely to be doing much selling. Who will help maintain the focus on business development? It can be a sales-savvy marketer, particularly when it comes to major pursuits that deserve special attention. Such pursuits, done right, blend marketing and sales tactics over the course of the sales cycle in an orchestrated collaboration.

In many cases, marketers are better positioned to prioritize the sales process, keep it moving when the project workload tends to crowd out everything else, and see the big picture in weaving together a winning strategy. And you know what else? Such involvement in sales makes them better at marketing.

Invest appropriately in market and client research. Being something of a research wonk myself, I marvel at the paucity of business development-related research in the typical A/E firm. I remember the old days when market and client research involved a half-day trip to the university library. Now I can get better information online in a fraction of the time.

So why isn't such research on the increase? Same answer as above: Too busy. Same solution: Dedicate people to conducting regular research—marketers being a good choice. The benefits seem clear. One firm picks up market and client insights primarily from casual conversation with clients, consultants, contractors, and vendors. Another firm conducts regular research and knows the status of every facility in their region that they might have interest in working with. Which firm has the competitive advantage?

One study found that professional service firms that conduct ongoing research grow 10x faster and have 60% higher profits than firms that conduct no formal research. That finding jives with my experience with firms in both categories. There's no justification in the digital age for foregoing regular market and client research. I recommend assigning this responsibility primarily to marketing, which is where the function normally resides in other industries.

Imagine being the firm known for its thought leadership, delivered through a variety of media and formats. When clients consider certain issues and challenges they face, they naturally think of your firm because yours is the most visible in offering relevant advice and information. You receive frequent inquiries from prospective clients because of your client-centered marketing.

Those inquiries often lead to discussions about how you might help further—essentially the start of your sales process. That process guides a series of planned conversations leading to an eventual decision to do business together. By the time the RFP is released, your firm is at the head of the pack and knows exactly what they want to see in your proposal. Throughout the entire sales process, you are supplying the buyer with valuable content that helps them define the path forward.

This is the vision for a strong marketing function, merged with a seamless business development process (as illustrated below). Most A/E firms aren't there yet, in large part because the role of marketing hasn't been properly valued and aligned. There's no better time to take care of that shortcoming than now.

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Monday, July 1, 2019

How to Transform Training Into Tangible Results

I'm a big advocate for training, as you might expect of someone who earns a substantial portion of his income providing training services. But my enthusiasm is mitigated by the realization that training usually fails to yield noticeable or lasting changes or improvement among those who are trained. This is particularly true of so-called "soft skills" training like that related to leadership, business development, project management, client service, or communication.

Don't you typically expect behavior change and performance improvement when you invest in training? Then you need to look beyond merely training. That's not to suggest that training isn't valuable in meeting such goals; it's just not the whole solution. Unfortunately many managers seem to think it is, or at least tend to rely too heavily on training to address performance deficiencies.

If you want to see a good return on your training investment, there's a lot more involved than simply hiring a good trainer. In fact, the quality of the training provides little assurance, in my experience, that it will have a positive impact on your firm. What matters most is what happens before and after the training. Let me offer some suggestions:

First, define what specific outcomes you're seeking. While training has other inherent benefits, let's focus on the one that most managers expect in return for spending thousands of dollars on it—performance improvement. That, of course, involves behavior change.
Training works best when it is part of a larger performance improvement initiative where the expected outcome is changing how people do their work. Training, then, becomes only one step towards achieving the desired results, and is dependent on the success of the other steps. So before you hire a trainer or develop your own in-house program, determine specifically what you want it to accomplish.

Align training content with the specific changes you intend to make. I've long been baffled by firms that invest in training that teaches strategies or methods they have no real intent to adopt. Do you want to improve how your people manage projects? There are some very good project management training programs available. But you must first address the question of how your firm is going to manage projects differently in the future. There's no point in having someone teach your people to do things a certain way if the firm will persist in doing it another way.

Firms routinely bring in trainers or send employees to outside training programs to learn a "better way." But those employees won't be changing how they do things unless the company is committed to such changes. So select training based on what changes your firm or department intends to make (or that simply reinforces what you are already doing).

Build the necessary "infrastructure" before training. The way you do your work is usually supported by certain procedures and tools, both formal and informal. If you expect changes in how your people work, you'll need to make corresponding changes in the "infrastructure" that supports that work. If you intend to train project managers in a different approach to tracking budget and schedule status, for example, you'll probably need to change some project accounting procedures and perhaps create some new spreadsheets. Make these changes before you do training.

There are a number of reasons why this is important. It signifies you're serious about the training resulting in real changes. It further reinforces the content and concepts of the training. It enables the training participants to begin applying the new approaches both during and immediately after the training while it's still fresh in their minds.

Several years ago, I led a major initiative to overhaul project delivery processes for a national environmental services firm. We spent over a year preparing for the training—identifying internal and external best practices, determining which new practices we were going to adopt, compiling these in a project managers handbook, creating new tools and resources. The training program, then, specifically addressed the changes we had already decided to make, and participants used the new handbook and associated tools in hands-on exercises during the training. There was no doubt the firm was serious about the training having a lasting impact!

Your objectives may be much less ambitious, but there is still wisdom in preparing the way to make the training you're planning be successful. Don't jump into training until you've taken the needed steps in advance to support it.

Make sure the training incorporates real-life, hands-on exercises. People learn best by doing, so any good training program should include adequate time for practicing some of the methods being taught. These exercises are even more effective when they involve real-life scenarios.

If you're providing sales training, for example, you want participants to have the chance to apply the material to current sales opportunities. This both makes the material more relevant and gives participants a head start in actually using what they've learned. Still better, have participants do some preparation in advance of the training (e.g., pulling sales account information together) so they can get the most out of the exercises.

Adopt new terminology from the training program. Many technical professionals fail to appreciate the importance of using new terms to describe new approaches. But the research bears this out. Words have a powerful influence in how we perceive things. Calling new ways by old names only reinforces the natural tendency to revert back to old habits.
For this reason, an effective training program should introduce you to some fresh terminology. My advice: Adopt at least some of these new terms as your own. If you prefer your own terms, that's fine as long as it's different from what you've been using and you incorporate these into your training.

Provide ongoing coaching and encouragement. Changing old work habits is difficult, so don't expect lasting change after training unless you continually reinforce it. Talk about the new approaches and expectations constantly. Get rid of procedures and tools that encourage people to revert back to old ways. Provide ongoing help in applying the new concepts on the job.

My favorite approach to training is what I call "real-time coaching." If you wanted training in proposal writing, for example, we would spend a little classroom time covering some fundamental concepts, but spend most of the time actually working together on a real proposal. There's no better way to learn and to help ensure that the training "sticks."
But regardless of what approach you use for the training itself, I strongly advocate the use of follow-up coaching. You can learn more about this approach in my previous post on the topic.

Reward those who best put the training into practice. The old axiom that "people do what rewards them" is true. If behavior change is the primary objective of training (and it usually is), make sure you acknowledge those who fulfill that objective and reward them for their efforts. Because change is difficult, many people will try hard initially but give up when the effort is not reinforced in some way. Rewarding your top achievers ("adopters") also serves to motivate others who may be more reluctant about adopting the new approach.
The rewards need not be extravagant or costly. In fact, elaborate tangible rewards tend to displace the more enduring intrinsic rewards of doing things a better way. Focus on the latter, using positive reinforcement to sustain desired behaviors.