Situation: A service company has been debating internally about which metrics they should use to evaluate company performance. This is important because it ties both to strategy, marketing, and bonus compensation. The CEO seeks advice based on the experience of others. What are good metrics for a service company?
Advice from the CEOs:
For a service company the key goal is delivery of a consistent quality product/service to the customer – as a company rather than as individual performers.
Instituting regular activities or meetings to infuse the company’s “special sauce” to projects will help assure consistent quality of service delivery.
To generate support and consensus within the company, ask employees what they would do to develop metrics to assure delivery of quality.
Have a clear view in mind of what the metrics should achieve – the result rather than the fully detailed process – before initiating this exercise and articulate this result as the desired objective.
Remain open to ideas from the group.
Use the exercise to establish a shared vision and to generate the best possible set of metrics to support the desired result.
Once both the metrics and a methodology for delivering the result have been selected – for example, weekly performance review meetings if this is the answer – then institutionalize these. It may be best to start with a “trial process” to refine details of the process.
An efficient regular process review meeting may save the company more than the 3 hours that it takes (preparation + travel + meeting) for this process.
If there are many “islands” of employees working at different company locations, consider organizing meetings into geographically convenient archipelagos.
Establish, within the service review process a “patented” company process that focuses on quality delivery. Publicize the existence of this process (not the details) when speaking with existing or potential clients. This is a key part of the company’s essential differentiation and “value add”.
Establish a definition of quality for the company.
Develop this as the company’s vision.
Develop the methodologies to consistently deliver this quality.
Long-term, drive this to professional training systems to consistently produce this quality.
Situation: The CEO of a service company sees that 20% of their business is serving large corporate customers. These accounts have proven to be more profitable than smaller clients. Their objective is to increase the large corporate client base from 20% to 60% of their business. How do you expand your large client base?
Advice from the CEOs:
Emphasize the differences and unique talents of the firm in comparison with the competition. Trust in the company’s abilities and act like a big-league firm.
Top shelf prices for services are not an issue for large clients; in fact, they expect quality firms to have high prices. Find the “clinch” price – where the client says, “you’re expensive, but because of your special talents you’re the firm that we will choose.” Compliment this with the firm’s ability to utilize lower cost outsourced services to offer an appealing overall cost of services. Clients will pay a premium for top shelf when they need it but will like the fact that routine needs can be met within their budgets.
Use the lessons from Blue Ocean Strategy to create advantages for the company’s services that existing firms don’t or can’t offer because of their structures and cultures.
Highlight the company’s high-touch culture, with great personal service. This provides a welcomed relief from the typical client experience with service firms.
Create buzz around the company’s leadership. Focus on speaking opportunities. Enhance the references to the company’s leadership on the company web site, including a listing of upcoming speaking engagements that are open to potential clients or individuals interested in the company’s expertise.
During speaking engagements to local groups on topics of high interest, build an educational library of edited flash content that hits the high points of the talks – not the full talk, but the most important 2-3 minutes on a given topic.
Add a library of these short videos on the company website.
By charging premium prices for select services, while sourcing research and expertise from personnel in lower cost geographies, the company will generate additional profit. Allocate some of these profits to community outreach to further enhance the company’s reputation and buzz. Be the firm that gives back.
Situation: A CEO is reviewing options for introducing a new offering. The target customers are small companies or projects within larger companies. The offering includes both an initial product and follow-on services. Education or training will be a component of the offering. What is the best way to roll out a business opportunity?
Advice from the CEOs:
It is best to position the offering as a straightforward proposition at launch and develop proof of concept. This will provide experience and an income stream to fund more complex offerings based on the initial model.
It will also provide insight on how to sell the product and service in different markets – manufacturing, service, and software.
Leverage this experience to pursue more complex models.
Build a portfolio of case studies before pitching to paying companies.
Use companies with whom relationships already exist as the proving base. These will become references for new clients.
Develop data to show actual cost savings from the use of the product and services.
Establish a relationship with an existing company for which the offering is complimentary and cross-offer products and services on an ad hoc basis.
Trial the product and service with one of their clients in return for a royalty or share of the profit.
Ask that company to make the introduction.
Target start-ups – offer an initial package for a low price. Offer the product to start-ups for free and get them hooked as long-term customers.
What would be needed to roll the offering through growth equity firms or venture capitalists?
This will require some proof that the offering increases the ROI to growth equity and VC portfolio companies and funds.
Note that the portfolio companies of growth equity firms are larger and farther up the growth curve
In current economy the key message to prospects may be that the offering will help them to “right size” their company.
Take a closer look at the offering and determine whether it is configured appropriately for the current environment.
Situation: A company currently has inside and outside sales teams, and coordinates efforts with SalesForce.com software. Their strategic initiatives are to double inbound leads, create a triage approach to new leads and to lower the cost of sales. How do you optimize your sales organization?
Advice from the CEOs:
When outside sales claims that they have limited band width, it is necessary to find how they are spending their time.
If they are not spending most of their time developing and closing sales, adjust the system so that they are concentrating their efforts in these two areas.
Decide what the sales teams are selling – set up the organization so that it complements the sales goals and objectives. Below are alternatives used by others.
One company has evolved “product managers” who are like sales engineers but more experienced. They are highly paid and highly skilled. They are business oriented, with good communication skills, well rounded, and have successfully closed sales.
In contrast, the role of this company’s “salespeople” is to follow up. Lower level salespeople are tasked with generating leads for the product managers
Another CEO observed that what the company has done up until now all has worked well. The question now is how to mature their system?
This company’s solution has been to use outsourced Inside Sales Support (ISS) based abroad to find prospects.
ISS personnel are teamed with and managed by the company’s salespeople. Salespeople develop their own system. The ratio is 1/1, but outside personnel are ½ time for each salesperson.
This allows the company to reduce services quickly if they become overwhelmed.
A third company uses a 3-tier system:
Inside sales for lead evaluation.
Outside sales – get hot leads from inside sales, develop, close.
Consider this alternative: instead of a shotgun approach, target three accounts – Elephants. One company did this with an intense 6-month focus. The President and CEO drive these sales. The result: they have closed one, one is pending, and a third is likely to close.
Another CEO observed that the essential issue appears to be an efficiency problem.
Too much of the outside sales time adds limited value to marketing or the company.
Redirect their efforts to hunting.
Once an account is closed, sales is out of the picture. The customer transitions to the customer service organization for additional sales and service.
Situation: A company offers a product combined with a service. Small companies can’t afford the combined price, but don’t need the full functionality of the combined product plus service. An option is to create an offering on a per-seat basis. In this option, how do you price seat utilization? How do you price a product and service?
Advice from the CEOs:
Pricing needs to follow value. For large companies, functionality and seamless operation are key. Small companies have different challenges – they have less money and don’t need all the features required by large companies. Configure a limited product for this market.
Don’t de-feature the product – create a different use / pricing model. Consider a model that prices based on the user company’s revenue, with periodic review of their revenue and fees paid. As they grow and increase utilization, they increase their ability to pay for, and their need for full utilization.
Use a cloud model and create a “pay per amount of use” option. Limit this offering to X number of users or X number of projects to create a different product from the full license option. While this will require monitoring, it will differentiate the partial license option from the full license option.
Develop an alternative to what is offered by the chief competitor and create an offering that this competitor can’t compete with.
Before making a final decision, institute a formal process for collecting ongoing feedback from customers. This will help to clarify alternatives going forward.
Situation: A CEO wants to increase brand awareness for her company and its primary service. The objective is to increase the client base and drive revenue growth. They have identified their primary growth opportunity and differentiating advantage. What else should they do? How do you increase brand awareness?
Advice from the CEOs:
What is lacking is a clear vision, path, and marketing plan. These are prerequisites to deciding either the solution or hiring a high caliber individual to execute the plan.
What steps are involved?
Survey 20% of current clients. Ask “why did you choose us?”
Develop the tools to track and show clients service performance online.
Use these same tools to show company performance online.
Tune messaging to potential clients to highlight demonstrated service performance.
Play elite – as the company’s name and reputation grow, clients should aspire to being accepted as clients.
What is unique about the company’s ability to manage and extend the longevity of clients’ key assets?
How well prepared are potential clients to manage this on their own?
How does the company help potential clients to manage and extend the life of those assets?
Once there is a clear plan, fine-tune the internal focus of the company to align with the plan.
Increase involvement in communities where potential clients are found.
Host seminars and webinars on relevant topics.
Evening seminars in locations that potential customers congregate – existing clients attend and bring a friend.
Focus on referrals from existing clients – with a reward – a free consultation.
Look for non-competing service providers who can be good referral sources.
Make it easy for potential clients to switch. Use mass-marketing to spread the word with a multi-tiered approach to different segments of the target market.
Situation: The head of a small service company wants to become more strategic – more like a CEO. Ideally, he wants to create a small samurai team to help him expand. He prefers working with a range of clients to develop creative, out of the box solutions. How do you transition from boss to CEO?
Advice from the CEOs:
The eMyth Revisited by Michael Gerber is a valuable primer on how to bring in more clients and revenue. The critical question that this book helps to answer is “what do I want to build?”
The book walks you through the critical questions that will help to answer whether your true ambition is to be a Picasso with helpers or a company. The answer may be either, but how you build each is different.
The more that skills can tied to a tangible outcome the easier it is for clients to hire a company. Quantify past successes. Make it easy to justify hiring your team.
To add to your pipeline:
Help friends help you. Make it easy for them to refer you. This can be simple: YouTube videos or improving the company website to highlight past successes.
The company web site can’t be just OK – it must be the all-important credibility builder that the company needs. Recreate the site to wow the visitor and tell the company’s story. Make it fun and compelling.
Participate in groups or forums that your targets attend. Create presentations, webinars, etc. Establish the company as an expert with the answer and as a trusted resource.
Also present to professional organizations to establish expertise and credibility.
Testimonials are powerful – particularly if backed by metrics.
Collaborate with people with similar depth of experience who can help develop the pipeline. Offer them a cut of total job revenue.
Situation: The CEO of a software company has been presented with two opportunities by a large customer – international expansion to support their sales and creation of a data warehouse facility. The company has the option of pursuing either or both. The customer is not offering up-front cash to support either opportunity. Should they pursue either or both? How do you choose between opportunities?
Advice from the CEOs:
Keep pursuing both opportunities and establish a series of decision points which will yield either a Go or No-Go decision on each. The big question is to determine how either will support company growth.
The customer is interested in both opportunities so ask them for assistance such as: removing barriers, client referrals, or some form of cash or investment.
For either opportunity to succeed requires a high level of internal buy-in and support from the customer.
If the company can afford to be aggressive now, this is a great time to move.
Look carefully at the ROI on each opportunity under different scenarios.
Do background work with potential clients to validate each market opportunity.
Specifically to International Expansion
Buy-in from the customer’s head of international sales is essential – without this it will be difficult to establish a solid relationship with the international sales team. Lack of this support will be a No-Go sign.
Can the customer provide office space, access to their infrastructure, administrative support, assistance in gaining necessary licenses to do business, etc. during start-up?
Could this venture be undertaken through a joint venture with an established international company? This would save start-up costs and allow validation of the opportunity before risking the company’s investment.
Execution will require a large-scale effort – both time and money. Include both in the Go/No-Go calculation.
Specifically to the Data Warehouse Facility
A competitor’s right of first refusal on this business is a barrier. However, the opportunity may be viewed as too small for the competitor. Is it possible to buy rights from this competitor?
Ask the customer to transition their customers to your company and its product.
Situation: The CEO of a service company needs to expand its market base due to concerns that a significant service and referrals partner may decide to stop working with them. A break-up would have significant impact on salaries, effort and focus. The company’s priority is to expand client growth to minimize the impact of a break-up. How do you expand your market base?
Advice from the CEOs:
To expand or build a market requires a champion. Someone like the company’s founder who has the passion and contacts to build new business.
Second, incentives must be established to reward success bringing in new clients. These incentives must have teeth – no success, no incentive. No safety valves.
Third, create a plan to support the new business development – including marketing, event attendance, etc.
Initially, be selective and target just a few highly desirable new clients to test and refine the client attraction model before expanding to the broader potential client audience.
Build a set of case studies of services and results for new clients.
Track and prove out the profitability and workability of this model.
How should the effort to expand the market base be constructed?
Start with preparation. Research the current prospect list to assure that they are good prospects. Also look at the current company culture – do the company’s strengths align with what is needed to attract and serve new clients?
If the research shows that a significant number of prospects are different from current clients, think of this as a new channel. Create a different business unit to specialize in serving these clients. Hire a team to focus exclusively on the new client group, with proper incentives tied to achievement with these prospects.
Another company had a similar choice. They created a program to increase their market base and went after it with full focus. It took five years to accomplish vs. the two years that they had planned. Nevertheless, the results have been worth the effort and expense. If the company believes in the model, invest in it.
Situation: The CEO of a service company continually finds the company short of cash. They have just hired a new accountant, but it will take time for this individual to understand the financial situation and to generate recommendations to improve cash flow. How do you keep a company afloat short-term?
Advice from the CEOs:
Point #1: This isn’t just a question of controlling costs; the company needs to build the infrastructure to succeed.
If there isn’t someone on the team in a position of authority, who the CEO can trust completely, hire this person. The CEO can’t control all risks.
While the company has shrunk over the last two years, it is still a substantial company and needs professional management. To grow effectively, professionals are required in key leadership positions. If necessary, hire experienced outside talent
Look for teachable moments as challenges arrive. The CEO, instead of solving a problem, should work with employees and mentor them through discovering and implementing solutions.
How to communicate this to current staff?
Put the story together. Be able to make a clear statement to them, including the current situation and future possibilities for which the company must prepare.
Generate charts and metrics to support key points.
Use senior staff as the mouthpieces to present the story to the rest of the organization. Once they are onboard, have them help craft the message. Don’t underestimate the CEO’s authority. This is business, not a popularity contest.
Let others make mistakes – it is part of the learning process – no matter how critical the situation.
Point #2 – Return to the company’s roots.
The faster everyone accepts that a focused approach is the only way to survive, the faster the company will turn around. Reestablishing company presence in key markets with a new model that speaks to their desires makes a lot of sense.
Be very clear as to what flat-rate service pricing covers. Include this in the signed customer agreement. Don’t allow costs to creep up or it will kill the profitability of flat rate jobs.
Create an infrastructure nimble enough to adapt as market conditions change. Identify what really works and focus on this.