Wednesday, February 24, 2021

5 Steps to Creating Added Value for Your Clients

Value creation is one of the prominent themes in the business literature. That makes perfect sense. The more value businesses deliver to their customers, the more value is returned in the form of revenue growth, higher profits, strong backlog, customer loyalty, etc. Indeed, the success of any business depends upon its ability to create value for its customers.

Oddly, however, this issue is rarely discussed in the A/E industry. I've been party to countless strategic planning workshops, business development meetings, proposal strategy sessions, and project planning meetings over the course of my 45 years in this business and could probably count on my fingers the number of times value creation was discussed at all.

The evidence is clear: Value drives competitive advantage. As A/E firms grapple with the challenge of differentiating themselves from their competitors and fighting the trend of commoditization, why haven't they given more attention to how to grow client value? I don't have an easy answer. But I suspect it starts with how our industry thinks about our work.

We focus more on technical solutions than business solutions (although our solutions do ultimately deliver business results). We describe our work more in terms of the services we provide and the tasks we perform than the outcomes our efforts achieve. There's a disconnect between what we tend to emphasize and the true value of what we provide to clients. Thus our work is arguably undervalued by clients when compared to that of other professional service providers (for example, we have a lower profit and labor multiplier).

So what are some meaningful steps your firm could take toward creating greater value for your clients? Let me suggest the following to get you started:

Step 1. Cultivate your strategic thinking. As with any significant transition, becoming a better value creator will for most in our profession involve a change in thinking. As noted above, this will require thinking differently about our work, specifically in linking our technical solutions to client business results. This is a challenge for many in our profession, especially those with engineering or scientific backgrounds, because of their natural bent toward analytical thinking.

Now let me be clear, the analytical mindset is critical to success in our business. But it is also limiting. Most A/E firms that are serious about value creation would benefit from having more strategic thinking on their project teams. Consider the different tendencies and points of emphasis among analytical and strategic thinkers as highlighted in the table below:

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The big difference is the tendency to zoom in to focus on details versus zooming out to see the bigger picture. Within that larger frame are the nontechnical, business-oriented issues to which A/E professionals often give too little attention—yet where added value is usually found. How do you cultivate your strategic thinking? A few tips:

  • Set time aside for strategic thinking. Making the switch between analytical, detail-oriented thinking and big-picture, strategically-oriented thinking requires some scheduled time and intentionality.
  • Seek out different perspectives. You can talk to others who tend to have different ideas from your own, or you can go online and look for the same thing.
  • Get all your facts and data together. I've observed that while we tend to do the deep dive into technical data related to a project, we often come up short in information about the more strategic aspects of the project.
  • Explore both the technical and nontechnical issues. It's critically important to give adequate attention to the nontechnical components of the project, which to the client are typically more important. I'll offer a framework for exploring these issues below.
  • Confront your biases and blind spots. We all have them, and they can cloud our ability to see the possibilities for creating greater project value.

The quickest way to boost your firm's strategic thinking is active collaboration between analytical and strategic thinkers. Invite to your project planning and strategy development process individuals whose main contributions will not be technical, but strategic and big picture.

Step 2. Align Your Perspective with the Client's. One essential tenet of value creation is that value is defined by the recipient, not the provider. Thus asking the client the right questions and listening carefully for insight is crucial. But there's more to seeing things as the client sees them than merely asking good questions. You want to try to look through a similar frame of reference.

One simple technique I've used for years to move in this direction is to diagnose client needs at three levels—strategic, technical, and people. That's not to imply that clients see their needs at those three levels, but they do tend to see them more broadly than most technical professionals do. Whereas we might be inclined to see a technical problem in need of a technical solution, the client is more likely to see a technical problem that has business impacts and requires a solution that delivers business results.

Analyzing needs at three levels helps us better understand the strategic and people impacts and develop solutions that better address the broader scope of those impacts. This approach, in my experience, has repeatedly proven effective in creating added value.

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Step 3. Let Outcomes Drive Your Project Strategy. As Peter Drucker wisely noted years ago, customers don't really buy products or services; they buy what those products or services do for them. Likewise, studies by Arizona State University and the MIT Sloan School of Management both came to essentially the same conclusion—buyers buy outcomes, not solutions. Is it any different for buyers of our services? I don't think so.

Yet how often do client outcomes truly drive your project strategy development? Isn't that what the project is all about? If you make outcomes the centerpiece of your project, you'll be among the minority who step into the "value zone." Successful projects aren't defined primarily by a competent technical scope completed on time and on budget, but on the delivery of desired outcomes.

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To facilitate this approach, I recommend two key questions to frame your project strategy: (1) What does success look like? (Outcomes) and (2) How will we deliver that? (Strategy). Be sure to address those questions in that order. I also suggest breaking down client outcomes at the same levels as client needs—strategic, technical, people. Inclined to think this is merely an academic exercise? I've seen this process shape many successful projects, as well as win several large contracts based upon a more broad-based project strategy.

Step 4. Prioritize the Client Experience (CX). Several years ago, a survey of over 500 A/E firm clients posed this question: "If you consider that we provide you value in two ways and that together they equal 100 percent, how would you [the client] divide the value you receive between our technical skills (what we do) and our client-service skills (how we do it)?"

The answer? Clients said it was 50/50. In other words, they value the experience you deliver just as much as the expertise you deliver. Does your firm work just as hard on delighting clients as you do on turning out proficient technical scopes of work? Most firms don't. This provides you with an excellent opportunity to add differential value.

For most firms, this means being more intentional and structured with regards to the client experience. The norm in our business seems to be "good people doing the right thing for the client." We rely on individual client-skills competency rather than shared standards and practices. The results are predictably inconsistent, as this competency varies widely among the typical firm's project and client managers.

A significant step towards greater structure is to "benchmark expectations." This involves mutually identifying at the start of a project what will constitute a great working relationship between your firm and the client. I've developed a tool called the Client Service Planner, which has been used by many firms. It guides a conversation that explores various aspects of the working relationship—things that are often assumed rather than confirmed.

In my experience troubleshooting problems between clients and consultants, I've found that the most common cause for the breakdown is a failure to understand what the client really expected regarding how the two parties would work together. Beware of making assumptions about this, which often happens. Instead, benchmark shared expectations.

Step 5. Stay Engaged Until the ROI Is Realized. When is value consummated? When the client realizes a return on their investment. That happens when the desired outcomes are achieved. Here's the interesting thing: The real value of a project is usually not created when the typical A/E scope of work is completed. At that point, the client has perhaps a concept drawing, design documents, or a report. ROI doesn't occur until later, when something is constructed and put into operation, or a recommendation is successfully implemented.

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This creates an interesting challenge for the A/E firm committed to value creation. What should you do about the gap that often exists between your work and the client's ROI? Stay engaged, whether under contract or not. It's well worth the typically small amount of time required to maintain a meaningful role in the project. It could determine the client's perception of the value you provided.

I've seen too many situations where a firm wasn't involved during the construction phase, for example, and things went sideways, often without the firm's knowledge. Sometimes the design firm was at fault. Other times it was a matter of the firm not being there to defend itself. Sometimes it was simply a misunderstanding that could have been resolved if the firm had been invited to the discussion. The point is that checking out between the conclusion of your scope of work and the client's ROI puts the ultimate value you create at greater risk.

Instead, you might pursue continued involvement as follows:

  • Keep abreast of project progress. Follow the course of the project through to ultimate completion and track how well things are proceeding at any given stage.
  • Check in with the client at critical junctures. Contact the client at points when difficulties or uncertainties are most likely to occur, and certainly when you become aware of a problem. Demonstrate your continuing interest and concern for the client's success.
  • Offer your help as appropriate. When the opportunity arises to answer questions or help resolve a problem—and you can do so without incurring significant costs or liability without a contract—communicate your willingness to help. Even better, persuade the client to contract with you for low-cost support services beyond your initial scope of work.
  • Confirm the client is satisfied with the end result. How the client views your contribution to the project is defined in large part by how well the completed project meets expected outcomes. Don't settle for a client debriefing only when your work is done; follow up again at the end of the project.

No one creates additional value for clients by simply doing what they were asked to do. You have to go beyond what was expected. The steps described above can help you substantially exceed client expectations without requiring a lot of additional effort. It's more about a mindset change—a focus on success outcomes rather than technical solutions. I'm convinced that greater emphasis on value creation is a ripe opportunity for ambitious A/E firms to differentiate themselves from their competitors and to attract more loyal clients.

Friday, January 29, 2021

The Problem with Qualifications-Based Selection

The A/E profession has fought long and hard for qualifications-based selection. It was formally
established by Congress in 1972 with passage of the Brooks Act, which required federal agencies to procure A/E services based on qualifications rather than price. Forty-six states have since passed their own version of this law, while QBS practices have also filtered down to numerous local governments, institutions, and even private sector organizations.

QBS is a remarkable achievement for our industry. I know of no other professional services sector that has such government protection from the inherent forces of the marketplace (i.e., the commoditization of undifferentiated providers). Perhaps that's part of my reservation about it. Whatever you think of the merits of QBS, I think it wise to recognize its shortcomings and adjust your competitive strategy accordingly. What follows are some of the issues I see with it:

QBS shifts the focus from the buyer to the seller. Perhaps the most popular sales advice is to focus on the customer. Yet QBS-guided RFPs consistently suggest that the focus be on your firm. They ask you to provide an overview of your firm, describe your relevant qualifications, highlight the project team's experience, offer a breakdown of your staffing mix, etc. Oddly, these RFPs often ignore or downplay the most client-centered qualifications, such as: How well you understand the client's needs, how you will deliver the business outcomes the client desires, or how you will craft a strong working relationship.

Regardless of what the RFP says, I'm convinced that clients ultimately act according to their own self interest. All buyers do. "It's all about us, not you" is Secret #1 in former client Gary Coover's book Secrets of the Selection Committee. But that reality is not reflected in most RFPs. This is not to suggest that clients intentionally circumvent their own selection process to get the result they want. But the human factor is unavoidable, no matter how objective the client tries to make the process.

It's difficult to objectively differentiate between firms on qualifications alone. For any given solicitation, the likelihood is that there are several competitors that are fully qualified to perform the work. Is the firm with the stronger resume necessarily the best choice? Often not. There can be a number of factors not addressed in the RFP—such as greater familiarity with the project, an existing relationship with the client, proximity to the site, or the client's preference for working with a smaller or larger firm—that favor a firm with lesser credentials. Even when the RFP lists evaluation criteria and assigns points to each, the actual process of determining those point totals is inherently subjective, especially among firms that are all fully capable of doing the work.

Unfortunately, most firms follow the RFP's lead and assume they must win the job primarily based on their qualifications. Rather than focusing on providing a strong value proposition that resonates with the client, they devote far more space to hyping themselves. If they could view their self-indulgence through the eyes of the client, they would recognize how little difference there usually is between their qualifications and those of their competitors.

Qualifications are the proof, not the product. Clients aren't selecting your firm because of what you've done for others, but what they believe you will do for them. Ultimately, they're deciding which firm offers the best value proposition. Huh, what? When did you ever see an RFP that asked for your value proposition? Yet every buying decision is predicated on the perceived value received. And that value is embedded in the delivered outcomes.

Your qualifications are merely the evidence that you can deliver those outcomes. But QBS rarely frames the procurement process in those terms. And too many firms miss the point, passively responding to the RFP's emphasis on qualifications without ever considering what the client is really buying. Of course, this presents a golden opportunity for those of us who take the initiative to go beyond the RFP and offer the client a compelling value proposition.

QBS isn't the solution for our commoditization problem. A few years ago, ACEC surveyed engineering firm leaders about the growing commoditization of our industry. Respondents indicated that they believed it was a substantial threat to their business. When asked what they thought was the best strategy for combating commoditization, they responded—by more than 2-to-1 over any other option—that our firms needed to educate lawmakers and clients to enforce and expand QBS rules.

Missing from the list of recommended anti-commoditization strategies? Stop acting like a commodity! Commoditization is a market-driven consequence of failing to differentiate. Ironically, QBS procurements often seduce firms into trying to construct competitive advantage out of what is typically a nondifferentiator—their attempt to demonstrate superior qualifications. QBS helps protect us from the consequence of lack of differentiation, but does nothing about (and often exacerbates) the root cause.

Despite my criticisms of qualifications-based selection, I must admit that I've benefited greatly from it as a business development and proposal professional for many years. That's because I typically run counter to the direction that most of my competitors take. While they're faithfully responding to the letter of the RFP, I'm responding to what the RFP doesn't say (while still complying with it, of course). While they're focused on showcasing their strengths and qualifications, I'm featuring our value proposition—solution + outcomes + benefits—offering our qualifications as proof we can deliver. While they're writing about their past successes, I'm writing the story of the client's future success.

And I want to encourage you to do the same. That's the primary reason for this article, not to critique but to inspire. QBS is only an impediment when you try to make it your competitive advantage. Focus on the client's interests instead and watch your win rate soar.