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Growth Strategy

6 Tips for Assessing Growth Opportunities in Professional Services Firms

By Jeff McKay

Planning for next year is well underway in firms around the world. Soon performance goals and marketing budgets will be allocated in hopes of achieving desired growth. It is an exciting and exhilarating time.

Over the years, I’ve seen many zealous practice leaders attack “sure things” that simply had no chance of panning out. In their pursuit, they wasted much time and money chasing growth that never existed. To help you achieve your desired growth and avoid squandering valuable resources, here are a few hard-earned lessons from my time in the trenches for you to consider as you make investment decisions.

Tip 1: Don’t assume that one successful client engagement creates a growth opportunity.

I have talked often about how consultants believe they can translate one recent client win into a new practice area or huge growth opportunity. This approach often leads to flawed growth projections because it is built on hubris and operates under false assumptions. Ironically, it happens because many practice leaders have been “winners” throughout their careers.

Past success leads to a “Just do it!” mindset. It’s nice to have a positive, can-do attitude, but don’t confuse optimism and market realities. This hubris leads to a false sense that all clients are going to look like the last client. That is seldom the case. Business leaders need to be crystal clear about what client issues have given rise to the need at hand. More importantly, determine how consistent they are across the marketplace. What was the nature of the need? Was it a regulatory requirement? Was it a "competitive advantage" issue or is it just "a nice to have"? Buyers see value and buy for many different reasons.

Likewise, pay attention to the often-overlooked dimension of the partner’s/firm’s relationship with a given client and to what degree it drove the success of the work. Can the exact nature of that relationship be replicated and scaled with other clients? This leads me to Tip 2.

Tip 2: Think of your organic growth opportunity like you would an acquisition.

Most practice leaders see organic growth and acquisition as very distinct types of growth opportunities. They shouldn’t. Both should require the same level of scrutiny before allocating scarce resources.

Typical service/product pre-launch “market research” sizes the market, describes competitors, and paints a broad picture of the market. Most firms shortcut even this minimal research.

Routinely, having a consultant say, "I've already shown you that we can win business with (fill in the blank), and nobody knows my clients better than I do” suffices as research.

Commercial due diligence, on the other hand, starts with the business strategy and key assumptions about what will lead to the growth initiative’s success. Due diligence’s goal is to support or refute an idea based on assessing key strategic drivers, not just gathering statistics. Due diligence has a sharp-edged point-of-view about the probability of the intended strategy being successful; market research does not.

When firms contemplate an acquisition, they often engage a third party to address a number of questions about the potential market. Firms want to identify potential issues in the market or potential assumption fallacies that would undermine the acquisition. The goal is to gather information that confirms or refutes those key assumptions or those key hypotheses.

A partner opinion, market research, and commercial due diligence are very different things. Perform the latter.

Tip 3: This is a growth initiative, not a fun branding project for the marketing team.

Most compensation systems are built around sales quota and create incredible pressure to sell work. Partners who are pressured to sell work and fill gaps in their book of business often take an "sell all of the above" approach to sales and marketing. However, a prospect can’t buy something unless it has a name and a branded brochure. Let’s “brand this product and start marketing it" is a siren’s song to marketers who love to do creative work.

More to the point, when a partner who belongs to the Productivity School of Marketing Thought, comes to Marketing for support, the marketers are expected to "produce."

With the Marketing team ready and willing to “productize,” an internal process engine starts up and drives organizations to launch products before they've fully assessed the market opportunity. Don’t start the machine before its time and waste the firm’s and your practice’s resources. This approach squanders more marketing resources than any other.

READ: Smartest Way to Allocate Marketing Budget

Tip 4: Be aware that the larger your firm, the higher the probability that a marginal product/service will launch.

Larger, matrixed, multi-practice area firms with significant distance (geographical & hierarchical) between senior leadership and the market-facing partners, struggle more launching viable solutions. When there are multiple levels and a complex planning process, there's more opportunity for partners to pursue new products or services without the proper scrutiny.

In small- and mid-sized firms, the leadership and the market-facing partners are more closely linked. In many cases, the leaders are still active in the market. These firms have more constructive and challenging discussions about allocating the organization's resources--primarily because they can't recover from a strategic misstep as easily. They have an opportunity to make sure that ideas are vetted properly before people start galloping off and needlessly employing limited resources.

Tip 5: Don’t get emotional.

A lot of growth decisions become quite emotional. When a partner has a huge bogey to hit or a senior manager wants to build a book of business to become a partner, s/he often feels the need to get going now!

Leaders who have been success in the past really “believe” in their people and their service. Having an outside voice (i.e. outside the practice or office) deny a partner or business leader the opportunity to pursue a growth opportunity is a personal affront to a partner's business savvy and ability to deliver. As a result, they're willing to pursue an opportunity with a low probability of success just to prove others wrong. Stay calm. Don’t let it get personal. Evaluate the critical feedback. Strong ideas will rise on their own merit.

Tip 6: Fail fast

The process of validating great ideas is the mirror process of looking for potential signals to kill bad ideas—and to kill them fast. Often, the best thing a practice can do is to kill an opportunity even before the due diligence scope is complete. Due diligence is not about taking up a huge research effort for research’s sake. It is about getting to a prudent go/no-go decision ASAP.

Ask yourself, “What has to go right for this new product launch to be successful?” Write down as many of the critical things as possible. Test each and every one of those suppositions when you're speaking to potential customers, competitors, and advisors. Discern the probabilities of those things happening. Probe your growth thesis from all angles. Be purposefully looking for reasons TO KILL the idea. By uncovering all the possible fatal flaws, you can begin modifying your thesis to strengthen your solution and prudently manage the associated risk.

 

Takeaway

If you find yourself mid-stream or even just contemplating the launch of a new product, make sure that you’re intentional about what has to go right for your practice to hit its number or to achieve some other strategic objective. Don’t assume because one or two clients solved a specific problem that every other firm (or a sizable market) will do the same.

Be explicit about the most important things that have to go right, test your assumptions by speaking to potential customers and collecting data. Be objective. Don’t let emotional bias lead you to a false conclusion. Really challenge people to get as much “clean” information as you can. Test the key assumptions underpinning a growth initiative.

Most importantly, have the courage to get what’s needed to either invest properly in a exceptional idea or kill a bad one.

Be prudent.

Photo credit: Redd Angelo and Unsplash.com

 

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