An eight-stage approach to business development can deliver sustainable improvements in firm revenues and profits, sayDerek Klyhn and Rob Lees
The first article in this series discussed the revenue challenge facing managing partners in the current economic climate and introduced a new model of the business development process.1 The success of this model is predicated on two fundamental tenets:
-
the process must be viewed holistically, from deciding how the firm wants to position itself (or what reputation it wants to have in its chosen markets) through to achieving above-average profitability compared to its major competitors (the validation of its reputation); and
-
even if the process is viewed as an integral part of how the firm goes to market, it will fail to yield the revenues that it should unless the partners have the capabilities to execute it effectively.
This article focuses on how to ensure the sales process operates as part of a fully-integrated business management process. Partner capability is discussed in detail in the third (and final) article in this series.
Traditional model
The traditional model of business development that has served professional service firms so well for so many years is, in essence, very simple - work is typically initiated by the firm's clients, either directly or via recommendations to other parties.
In the traditional model (see Figure 1), work primarily comes from one of
five sources:
-
annuity / follow-on - work that an existing client gives to its advisor as a natural consequence of its relationship;
-
referrals - work that an existing client refers to its advisor and which is awarded without a competitive pitch (referrals are often from a company or companies from within the same group as the existing client);
-
'bluebirds' - work that 'flies in through the window' and is awarded to the firm from a previously unknown source (often based on the firm's reputation);
-
invitations to tender - work that, following the receipt of an invitation to tender, is won after a competitive pitch process; and
-
introductions - work that is won as a result of following up an introduction, usually from an existing client.
A new approach
In the traditional model of business development, the key to success is the firm's reputation and the effective leveraging of its partners' networks.
Although not all firms have responded at the same pace, most have been forced to move business development to the top of their agenda in response to the current competitive pressures, including a significant downturn in the rate of revenue growth, the need to pay for investments to increase either scale or scope (or both) and the cost of introducing new technology.
In doing so, they now face the challenge of implementing a way of 'going to market' that delivers sustainable improvements in revenue growth and profitability that are in excess of their competitors. In short, they need to use the eight-stage model that was introduced in the first article in this series (see Figure 2). Each of the eight stages is briefly described in Figure 3.
To better understand the model and also to appreciate why so many firms are still struggling to establish a sustainable sales culture, this article discusses the various stages of the model, working outwards from what many regard as the heart of business development - the point of sale.
From lead to sale
Historically, the act of selling was synonymous with the competitive pitch process that inevitably followed the receipt of an invitation to tender. In today's world, though, the objective is to always achieve a position where a competitive pitch is never required. To achieve this position, firms must, in essence, work backwards from winning the work. This is done by:
-
determining which people are involved in awarding the work (either directly
or indirectly through their influence);
-
ensuring the partners have effective relationships with them that enable them to ask for the work; and, prior to that,
-
creating opportunities to meet the individuals in question.
Success is a consequence of the firm's partners demonstrating the skills of lead generation and relationship enhancement that they utilise in obtaining follow-on and referred work from existing clients, with potential purchasers of the firm's services. This must encompass progressing their relationships with potential purchasers to a point where asking for the work (and knowing they will receive it) is a natural consequence of the trust between the parties.
Effective execution of these stages demands time. It is impossible to generate a steady stream of sales opportunities without giving the necessary time to such efforts or having the necessary perseverance.
Time must be allocated to both lead generation and relationship development and, while the time for both of these activities typically comes out of that spent serving clients (partners' raison d'être), short-cutting either stage will inevitably have serious consequences either in terms of the incorrect people being targeted or the relationships not being
of sufficient depth to make the winning
of work successful.
Marketing and promotion
For many years, most firms have focused their activities on promoting the firm, its capabilities and its people. However, since the marketing department is often seen as a guardian of the firm's promotional activities - whether it is article writing, public relations, seminars, thought leadership papers or industry-based research - these activities are not typically viewed as a key part of the business development process.
This view is hardly surprising given the historic focus on the corporate brand, which may increase awareness of the firm, but usually does little in terms of generating leads. Effective promotion demands the converse, with firms focusing on promotional activities that are specifically designed to generate leads as well as awareness.
A thought leadership paper, for example, should be seen as an opportunity to promote the firm and as the springboard for a number of marketing and business development opportunities. This could include holding seminars at which the firm's experts can present the key messages from the thought leadership paper to clients and potential clients, thereby creating opportunities for leads to be generated
or for existing relationships to be developed further.
Similarly, the press coverage garnered from a well-crafted thought-leadership press release could be reproduced as third-party endorsements that reinforce the credibility of the firm's views. Such reproduced articles can then be distributed to existing clients and prospects in order to stimulate interest in meeting to discuss the issues raised in the paper.
There are many examples of how firms are now linking what were previously seen as purely promotional activities with face-to-face business development. For instance, some firms sponsor league tables within their chosen sectors. Such firms benefit not only from name promotion but also from events associated with their sponsorship, which provide the firm's personnel with opportunities to meet and develop relationships with the people within their target markets.
Sponsorship of league tables provides two other insights into the business development process: it provides a means for firms to establish and maintain a presence in a market and it creates a way for firms to identify and target individual companies.
Positioning and targeting
Before a firm decides how to promote itself, it should determine how it wants to be positioned (i.e. what it wants to be known for - its reputation - within its chosen markets). This process includes determining which services it wants to provide and to which companies, and the way in which it intends to add value.
A clearly-articulated positioning establishes the context for all of the firm's activities, such as service line expansion and professional development, as well as business development. Targeting takes positioning one step further. Under the umbrella of the firm's desired positioning, targeting identifies the specific companies that the firm wants to win as clients.
Without clear positioning and identified targets, a firm may find itself pursuing all kinds of business and, as a result, spreading its business development resources too thinly.
In addition, the resulting diverse mix of clients may make it extremely difficult for the firm to build up its expertise and knowledge in the areas in which it wants to establish its reputation. Effective positioning and targeting enable the firm's partners to decide where to allocate resources, including which leads to chase and which to drop. They also help potential clients and employees to understand what the firm offers and what it stands for.
However, positioning is usually seen as part of the strategic/business planning process which, in most firms, typically occurs every few years, rather than as part of the business development process. Targeting, although seen as part of business development, is not always carried out or revisited other than on an annual basis; increasing competition indicates there should be greater frequency of review of both processes. Without effective positioning and targeting, there is neither an overall context nor a focus to the firm's business development efforts.
Performance management
Once a sale has been achieved, the firm needs to deliver the work that it has sold. This stage of the business development process is also often overlooked,
despite the delivery of the assignment
being an absolutely critical stage of
the process.
Delivering excellent service - both technically and commercially - ensures
the promises implicit in the sale are
fulfilled. Outstanding delivery should
also reinforce the firm's reputation in
the mind of the client and position the
firm in an extremely positive light for subsequent work.
In addition to delivering the
assignment, the firm's professionals
should also be advancing their
relationships with the client's key
(influential) personnel and be searching
for other sales opportunities - whether
they are in their area of expertise or
there are opportunities for cross selling
the firm's other services.
It is also important that clients
feel valued. The importance of seeking out timely client feedback cannot be overstressed. Client feedback, even if it initially involves a questionnaire, should always include a face-to-face meeting, as this provides an opportunity for confirming that the assignment has been delivered to the client's satisfaction, for building relationships and for identifying areas in which the firm could add value - either currently or in future.
Fees and profitability
Does business development stop once the assignment has been delivered? No, there is one further stage in the business development process that arises once the client has been invoiced and the bill has been paid.
This stage involves assessing how the profit realised compares to that which was expected at the point of sale. It provides an opportunity to test whether the firm's reputation is reflected in the amount that
it can actually charge. Real differentiation, allied with high-quality work, should yield above-average profitability compared to the firm's major competitors.
This stage also confirms the extent to which the firm has succeeded in targeting the companies that yield the best returns. A careful analysis of the fee and profitability profile of the firm's client portfolio should reveal insights into where revenues and profits are being generated (note that the clients generating the highest revenue do not always provide the best returns), and determine which client relationships need greater attention in order to make the account more profitable. Once an assessment of potential assignments is taken into account, it should also indicate which clients are key to the business and, therefore, require special focus and relationship management.
The output of a thorough client portfolio review should also confirm that the firm's positioning and targeting strategies are aligned. If they are out of alignment, the data can be used to effect the necessary realignment.
Integrated processes
In order to succeed in the competitive marketplace, firms must view business development as part of a fully-integrated business management process that starts with the firm determining its positioning and ends with it achieving above-average profitability compared to its major competitors.
But, unless the firm's partners have the capabilities they need to execute each stage effectively, the firm will never reap the rewards it should. This capability challenge and, with it, the building of a self-sustaining sales culture, is the subject of the next (and final) article in this series.
Derek Klyhn and Rob Lees are founding partners of Møller PSF Group and consultants to PSF leaders worldwide (www.mollerpsfgcambridge.com)
Endnote
1. See 'Holistic services', Derek Klyhn
and Rob Lees, Managing Partner,
Vol. 16 Issue 9, June 2014
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